Reference no: EM13746893
1. Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 in equity. Both firms sell 10,000 units of output at $2.50 per unit. The variable costs of production are $1, and fixed production costs are $12,000. (To ease the calculation, assume no income tax.)
a. What is the operating income (EBIT) for both firms?
b. What are the earnings after interest?
c. If sales increase by 10 percent to 11,000 units, by what percentage will each firm's earnings after interest increase? To answer the question, determine the earnings after taxes and compute the percentage increase in these earnings from the answers you derived in part b.
d. Why are the percentage changes different?
|
Financial report for the ceo containing the efn calculation
: Prepare a 700- to 1,050-word financial report for the CEO containing the EFN calculation, the ratio calculations, and an explanation of how you reached the calculations. Explain which income statement and balance sheet items you assumed were varia..
|
|
Explain the main purpose of a quality management plan
: Explain the main purpose of a quality management plan. What are two metrics - besides those provided in this chapter - that Kristin and her team could use on the Just-In-Time training project. Besides ensuring that classrooms are ready for trainin..
|
|
Describe the strategic turning points
: Select an industry. In a 250-300 word response, describe the strategic turning points that caused change in the industry. Identify and describe how one company within the industry successfully reacted to the need for change
|
|
About the income tax rate
: Kold Corporation estimates that its 2015 taxable income will be $900,000. Thus, it is subject to a flat 34 percent income tax rate and incurs a $306,000 tax liability. Taxable income for 2014 was ($100,000). Kold carried back all its loss to prior ye..
|
|
What is the operating income for both firms
: Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 in equity. What is the operating income (EBIT) for both f..
|
|
What are the characteristics of a stock award plan
: What are the characteristics of a stock award plan? Is the stock restricted? What rights does the employee have? What generally happens when the employees leave the company?
|
|
What are the three key dates for dividends
: What are the three key dates for dividends? What are the journal entries, if any, for each date? What are the components of pension expense? Be sure and indicate if each component increases or decreases pension expense.
|
|
Identify the challenges or problems the venture may face
: In planning to take the entrepreneurial venture to another country, identify the challenges/problems the venture may face. What guidelines will you provide for managers to deal with the challenges/problems
|
|
Represent a cause-and-effect relationship
: Which of the following does NOT represent a cause-and-effect relationship?
|