$10.05 o If the firm borrows $40 of the $100 at an interest rate of 10%, what are the firm's net earnings? $7.37 No financial leverage With financial leverage Sales $200 $1,600 Expenses $185 $185 EBIT 15 15 Interest 0 $4 EBT 15 11 Taxes 4.95 3.63 Net earnings $10.05 $7.37 o What is the return on the owners' investment in each case? Why do the returns differ? Return on equity: $10.05/$100 =10.05% $7.37/$40 = 18.425% The return for b is higher due to the financial leverage use being successful. The reduction of taxes with the financial leverage resulted in a reduction in taxes from the interest expense.
As a result, the quantity and price of good A increase. a. Compute nominal GDP in the base year and later year. b. Compute real GDP in the base and later years (in base-year prices). c. Compute the GDP deflator in the later year, using your answers to parts a and b. d. Compute a fixed-weight price index for the later year, using the base-year quantities as weights. e. Which price index rises faster, the GDP deflator (Paasche) index or the fixed-weight index (Laspeyres) index 1 Question 3 (20 marks) .
Let (R/P)1 equal the initial value of the real rental price of capital, and (R/P)2 equal the final real rental price of capital after the labour force increases by 10 percent. The rental price increases by The real rental price also increases by 6.9 percent. Let (W/P)1 equal the initial value of the real wage, and (W/P)2 equal the final real wage after the labour force increases by 10 percent. The real wage increases by The real wage decreases by 2.8 percent. c) Using the same logic as (b) So, output increases by about 3 percent.
Financial Analysis * The tax rate is approximately 30% 5.618.8=29.79% 5.418.1=29.83% 5.418=30% * Based on the industry average, a sports store of similar size should be making around $21000 or 67% more profitable than Rhodes’ store. * Assuming the lots are of the same size and bear the same tax burden, if the unused lot is sold off property taxes would be reduced by $6000 at the 2008 rate. All else being equal, this would increase net profit by 6000×0.30=$1800, for a total of $14400. Profit as a percentage of sales would increase from 2.1% to 2.4%. * Of the $18400 Rhodes made in mortgage payments last year, $8000 was interest.
Management wants to maintain the finished goods inventory at 30% of the following month's sales. 3. Watson uses four units of direct material in each finished unit. The direct material price has been stable and is expected to remain so over the next six months. Management wants to maintain the ending direct materials inventory at 60% of the following month's production needs.
The NPV for purchasing the technologies is 94.71 million and the NPV for developing the technologies is 127.24 million. From this point, developing the technologies is a better choice. 3. IRR (Internal Rate of Return), which indicates the annual rate of return on an investment that assumes we could reinvest the cash flow at the same return. The IRR for purchasing and development are 18.88% and 24.57% respectively.
Margin of Safety (DOLLARS) Budgeted – break even = 100,000-62500= 37500 (Percentage) 37.500/100.000= 37.5% (Units) 37500/250= 150 3.Compute the company’s margin of safety in units assuming the proposal is accepted. Margin of Safety (Dollars) 137500-58929= 78571 (Units) 78571/275= 286 4. Compute the increase or decrease in profit assuming the proposal is accepted, show the contribution Income Statement for current and proposed. Present Proposed Sales 100,000 137500 Variable expense 64000 80000 CM 36000 57500 Fixed cost 22500 244750 Net income 13500 32750 difference: 19250 4a. What is the operating leverage for the current and proposed?
20.53 (45 min) Evaluation of customer service. Current data: Annual sales Average cost of sales as % of sales Sales growth Predictions related to new customer service: Increase in customer satisfaction Software and training costs for new customer service Ongoing operating costs for new customer service Cost savings from reduction of email response service Additional sales growth Without new customer service Sales, $15,000,000 x (1+ 0.04) Cost of sales @60% Gross margin With new customer service Sales, $15,000,000 x (1+ 0.04 + 0.06) $15,000,000 60% 4% 10% $300,000 $400,000 ($100,000) 6% Year 1 $ 15,600,000 9,360,000 $6,240,000 $ 16,500,000 Cost of sales @ 60% 9,900,000 Gross margin 6,600,000
The experience with excess inventory event has prompted owners of La Boutique C, to be more careful in buying merchandise after the output has no time. This will avoid staying in the stores taking up space, increasing storage costs, patent costs, and affecting the cash flow of the business for the purchase of different goods. Four years historical inventory data for La Boutique "C" The La Boutique “C” inventory data is the source for develop management proposal. Annual trend lines were plotted in a graphic to display the inventory amounts for each year and the trend line. In this case is positive, which indicates that the probability of inventory levels in the subsequent years will continue to rise without considering any additional factors that may influence the business.
X2 = Number of EXCELLENT model produced during 8 hour shift. Max 42X1 + 87X2 ST X1 + X2 ≤ 480 3X1 + 6X2 ≤ 480 4X1 + 2X2 ≤ 480 X1 ≥ X2 3X1 + 6X2 ≤ 4X1 + 2X2 + 30 3X1 + 6X2 ≤ 4X1 + 2X2 – 30 X1, X2 ≥ 0 If the management limits the difference between Line 1 and Line 2 up to 30 minutes, it is recommended to produce about 96.667 (or 97) units of SUPER and 31.667 (or 32) units of EXCELLENT in order to maximize the total profit. Even it gives $65 reduction on initial profit, there will be more efficient balance on workload where time for Line 1 is fully utilized and on Line 2 there is only 30 minutes of unused time. (See attached print-out, table № 6) Question 6 Let X1 = Number of SUPER model produced during 8 hour shift. X2 = Number of EXCELLENT model produced during 8 hour shift.