Their total revenue will be subtracted from their total expense which will be their net income. The net income and revenue will be times by 100 will be the profit margin. The net income plus depreciation will equal their cash flow. D. Suppose the change had halved, rather than doubled, the firm’s depreciation expense. Now, what would be the impact on net income, total profit margin, and cash flow?
Agoura purchased the equipment and the cost of the new plant, the price was 12.7 million. Whether or not this project pans out that money is spent. NPV and IRR In order to accurately calculate the NPV and the IRR one must take into account the initial working capital requirement of $100,000 for the first year and then 15% of sales for each of the following years. So for example earlier stated the gross profit of the first year was $9,475,000 you would take away the initial working capital requirement of $100,000. For each of the following years there is a slight calculation that needs to be done.
Let us suppose that the income tax rate for all Americans, regardless of the total income, is 20%. This would mean that someone who makes $10,000 would pay $2,000 dollars in taxes; someone who makes $100,000 would pay $20,000 to the federal government. By default, somebody who makes more money than someone else will pay more money in taxes. The concept of the ratio is meant to be used as a scale; not everyone can pay a fixed amount of money so the ratio takes a percentage of ones income to make it fair for everyone. The amount of money taxed is the same compared to the total income for everyone; hence the definition of a ratio.
These changes will add $1.00 per bottle to the variable cost of sales. Calculate the new break even given the increase in variable costs. After charging $1.00 more per bottle, the company would have to sell 1,600 bottles per day which would be 20% sales loss. 3. To reposition its water as a premium product, Healthy Spring will require an increase in its advertising and promotion budget of $900 daily.
The total return of an asset to its owners, all else being equal and within strict restrictive assumptions, is unaffected by the structure of its financing. As the debt in an LBO has a relatively fixed, albeit high, cost of capital, any returns in excess of this cost of capital flow through to the equity. • The tax shield of the acquisition debt increases the value of the firm. This enables the private equity sponsor to pay a higher price than would otherwise be possible. Because income flowing through to equity is taxed, while interest payments to debt are not, the capitalized value of cash flowing to debt is greater than the same cash stream flowing to equity.
The type of growth which results from compounding is called geometric or exponential growth. (Berk & DeMarzo, 2011, p. 89) Rule 3: Moving Cash flows back in time: The third rule stipulates to move a cash flow back in time, we must discount it. The third rule describes how to move cash flows backward in time. Suppose you would like to compute the value today of $1000 you anticipate to receive in a year. If the current market rate is 10%, you can compute this value by converting units.
[pic] Time Value of Money August 2008 Copyright 2008 Information Systems And Management Science August 2008 One of the cornerstones of finance is the concept of the time value of money. More concisely, a dollar received today is worth more than a dollar received some time in the future. For example, if you were confronted with the situation where you are offered one dollar today or one dollar one year from now, you would choose the option, which provides you with the most wealth. In the absence of interest, the decision of which option to choose would be irrelevant since one dollar received today would be equal to one dollar received one year from today. However, with the existence of interest, money has a 'time value' and the economic value of the two transactions cannot be compared.
Sales-force was incentivized by a quota system with quarterly volume quotas. Manufacturing Selling Prices of RBS increased 3 times in previous 5 years. Price increases were due to increase in raw material cost by 11%. Advertising was focused on new uses of product like pet care, baby care, pool care, outdoor care etc and emphasized non-toxic benefits of product. In 2006 too much RBS product moved in the market, so need to deplete Inventory and increase sales RBS More aggressive in promotion during last 3 years.
Question 10 - #93724 If X and Y are independent events, which of the following is most accurate? A) P(X | Y) = P(X). B) P(X or Y) = (P(X)) × (P(Y)). C) P(X or Y) = P(X) + P(Y). Question 11 - #93542 A T-bill with a face value of $100,000 and 140 days until maturity is selling for $98,000.
The volume is a constant which is assumed at 80% in the analysis of the price. On the other hand, informing the price-flex the price decreases would be the variablecosts, which can easily be reduced for the benefit of the company. In this worst and base case, ten percent decreases and this same percent remain for all the prices effectively. These are the main changes in both the methods of the pricing strategy. Furthermore, there is a need to increase the price by 6% to maintain the company’s original profit potential over the increase of cost.