Suppose that firm assets, shares outstanding, and operating costs stay fixed. also, there is no preferred...
Suppose that firm assets, shares outstanding, and operating costs stay fixed. also, there is no preferred stock. if firm sales increase by one percentage point, which scenario will result in the lowest percentage increase in net income?
Homework Answers
If the cost of good sold increases then there is lowest percentage increase in the net income with the above mentioned conditions.
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Suppose that firm assets, shares outstanding, and operating
costs stay fixed. also, there is no preferred...
Illinois Tool Company's (ITC) fixed operating costs are $1,260,000 and its variable cost ratio (i.e., variable costs as...
Illinois Tool Company's (ITC) fixed operating costs are $1,260,000 and its variable cost ratio (i.e., variable costs as a fraction of sales) is 0.70. The firm has $3,000,000 in bonds outstanding at an interest rate of 8%. ITC has 30,000 shares of $5 preferred stock and 150,000 shares of common stock outstanding. ITC is in the 50% corporate income tax bracket. Forecasted sales for next year are $9 million. What is ITC's degree of OPERATING LEVERAGE at a sales level...
Illinois Tool Company's (ITC) fixed operating costs are $1,260,000, and its variable cost ratio (i.e., variable...
Illinois Tool Company's (ITC) fixed operating costs are $1,260,000, and its variable cost ratio (i.e., variable costs as a fraction of sales) is 0.70. The firm has $3,000,000 in bonds outstanding at an interest rate of 8%. ITC has 30,000 shares of $5 preferred stock and 150,000 shares of common stock outstanding. ITC is in the 50% corporate income tax bracket. Forecasted sales for next year are $9 million. What is ITC's degree of combined leverage at a sales level...
Problem 20-01 Firm A has $9,200 in assets entirely financed with equity. Firm B also has $9,200 i...
Problem 20-01 Firm A has $9,200 in assets entirely financed with equity. Firm B also has $9,200 in assets, but these assets are financed by $4,600 in debt (with a 10 percent rate of interest) and $4,600 in equity. Both firms sell 11,000 units of output at $3.00 per unit. The variable costs of production are $1, and fixed production costs are $14,000. (To ease the calculation, assume no income tax.) a. What is the operating income (EBID for both...
Dropdown answers: 1. Current assets: 489, 359, 261, 326 2. Total assets: 662, 463, 597, 825...
Dropdown answers:
1. Current assets: 489, 359, 261, 326
2. Total assets: 662, 463, 597, 825
3. Subordinate debenture: 89, 116, 107, 44
4. $2.8 preferred stock c claims: 31, 26, 44, 62
5. Total claims: 597, 463, 835, 661
6. Interest expense: 12, 9, 4, 11
7. EBT: 44, 41, 49, 42
8. Taxes (50%): 24, 21, 20,22
9. Net income:24, 21, 20,22
10. Dividends on 2.8 preferred: 32, 37, 75, 3
11. Income available to common stockholders: -17,...
You are given the following information The firm has 200,000 shares outstanding for the entire year....
You are given the following information The firm has 200,000 shares outstanding for the entire year. It had net income of 250,000. It also had 2,000 7%, 1,000 Par- value bonds convertible into 25 shares of common each. The firm's tax rate is 40%. The firm has no preferred stock. What is fully diluted EPS
To be profitable, a firm has recover its costs. These costs include both its fixed and...
To be profitable, a firm has recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit. Consider the case of Blue Mouse Manufacturers: Blue Mouse Manufacturers is considering a project that will have fixed costs of $12,000,000. The product will be...
A firm has fixed operating costs of $25,000, a per unit sales price of $5, and...
A firm has fixed operating costs of $25,000, a per unit sales price of $5, and a variable cost per unit of $3. What is its operating breakeven point if it targets net operating income of $10,000? 25.000 units 17.500 units 12,500 units 15,000 units
EXCESS CAPACITY a. Assume that the company was operating at full capacity in 2016 with regard...
EXCESS CAPACITY
a.
Assume that the company was operating at full capacity in 2016 with
regard to all items except fixed assets; fixed assets in 2016 were
being utilized to only 75% of capacity. By what percentage could
2017 sales increase over 2016 sales without the need for an
increase in fixed assets? Round your answer to two decimal
places.
b. Now suppose 2017 sales increase by 30% over 2016 sales.
Assume that Krogh cannot sell any fixed assets. All...
Party, Inc. has no preferred stock outstanding. The company had 40,000 shares of common stock outstanding...
Party, Inc. has no preferred stock outstanding. The company had 40,000 shares of common stock outstanding on January 1, 2019 and issued 12,000 additional shares on May 1. If Party’s net income was $200,000, the company should report earnings per share of (to the nearest cent): Select one: A. $4.17 B. $3.85 C. $5.24 D. $4.44
Goodwill arises when one firm acquires the net assets of another firm and pays more for...
Goodwill arises when one firm acquires the net assets of another firm and pays more for those net assets than their current fair value. Suppose that Target Co. had operating income of $60,900 and net assets with a fair value of $233,000. Takeover Co. pays $302,000 for Target Co.'s net assets and business activities. Required: a. How much goodwill will result from this transaction? Goodwill b. Calculate the ROI for Target Co, based on its present operating income and the...
Problem 20-01 Firm A has $9,200 in assets entirely financed with equity. Firm B also has $9,200 in assets, but these assets are financed by $4,600 in debt (with a 10 percent rate of interest) and $4,600 in equity. Both firms sell 11,000 units of output at $3.00 per unit. The variable costs of production are $1, and fixed production costs are $14,000. (To ease the calculation, assume no income tax.) a. What is the operating income (EBID for both...
Dropdown answers:
1. Current assets: 489, 359, 261, 326
2. Total assets: 662, 463, 597, 825
3. Subordinate debenture: 89, 116, 107, 44
4. $2.8 preferred stock c claims: 31, 26, 44, 62
5. Total claims: 597, 463, 835, 661
6. Interest expense: 12, 9, 4, 11
7. EBT: 44, 41, 49, 42
8. Taxes (50%): 24, 21, 20,22
9. Net income:24, 21, 20,22
10. Dividends on 2.8 preferred: 32, 37, 75, 3
11. Income available to common stockholders: -17,...
To be profitable, a firm has recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit. Consider the case of Blue Mouse Manufacturers: Blue Mouse Manufacturers is considering a project that will have fixed costs of $12,000,000. The product will be...
A firm has fixed operating costs of $25,000, a per unit sales price of $5, and a variable cost per unit of $3. What is its operating breakeven point if it targets net operating income of $10,000? 25.000 units 17.500 units 12,500 units 15,000 units
EXCESS CAPACITY
a.
Assume that the company was operating at full capacity in 2016 with
regard to all items except fixed assets; fixed assets in 2016 were
being utilized to only 75% of capacity. By what percentage could
2017 sales increase over 2016 sales without the need for an
increase in fixed assets? Round your answer to two decimal
places.
b. Now suppose 2017 sales increase by 30% over 2016 sales.
Assume that Krogh cannot sell any fixed assets. All...
Goodwill arises when one firm acquires the net assets of another firm and pays more for those net assets than their current fair value. Suppose that Target Co. had operating income of $60,900 and net assets with a fair value of $233,000. Takeover Co. pays $302,000 for Target Co.'s net assets and business activities. Required: a. How much goodwill will result from this transaction? Goodwill b. Calculate the ROI for Target Co, based on its present operating income and the...
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