Managerial Finance And Team Assignment

Principles of Managerial Finance FIN/419 P12. 4 Breach alike analysis. Barry Carter is because aperture a music store. He wants to appraisal the cardinal of CDs he charge advertise to breach even. The CDs will be awash for $13. 98 each, capricious operating costs are $10. 48 per CD, and anniversary anchored operating costs are $73,500. A) Find the operating breakeven point in cardinal of CDs. Q= FC / P- VC Q= 73,500 / 13. 98 – 10. 48 Q= 21,000 CDs B) Account the absolute operating costs at the breakeven aggregate begin in allotment a. EBIT= Q x (P – VC) – FC EBIT= 21,000 x (13. 98 – 10. 48) – 73,500 EBIT= 21,000 x 3. 5 – 73,500 EBIT= 0 C) If Barry estimates that at a minimum he can advertise 2,000 CDs per month, should he go into the music business? 2,000 CDs per ages x 12 months = 24,000 CDs. Since the operating breakeven point in cardinal of CDs is 21,000, this agency that Barry will advertise 3,000 added CDs that will be a profit. Depending on Barry’s aftereffect of the music store, if he were to go into the music business and advertise 2,000 CDs a month, he would accomplish a profit. The accumulation would not be that abundant added aloft the operating breakeven point; however, it will still be a profit. I would booty the adventitious and go into the music business. D) How abundant EBIT will Barry apprehend if he sells the minimum 2,000 CDs per ages acclaimed in allotment c? EBIT= Q x (P – VC) – FC EBIT= 24,000 x (13. 98 – 10. 48) – 73,500 EBIT= 24,000 x 3. 5 – 73,500 EBIT= 10,500 P12-11 a. $0. 38 b. $1. 28 c. $1. 94 Ebit| | | | $24,600| $30,600| $35,000| beneath interest| | | $9,600| $9,600| $9,600| Net profits afore taxes| | $15,000| $21,000| $25,400| Les Taxes| | | | $6,000| $8,400| $10,160| Net profits afterwards taxes| | $9,000| $12,600| $15,240| Beneath adopted banal dividends| $7,500| $7,500| $7,500| Earings accessible for common| | $1,500| $5,100| $7,740| Earings per share| | | $0. 8| $1. 28| $1. 94| | | | | a| b| c| P12-24. : Integrative–optimal basic anatomy Intermediate a. Debt Ratio| 0%| | 15%| | 30%| | 45%| | 60%| EBIT| $2,000,000| | $2,000,000| | $2,000,000| | $2,000,000| | $2,000,000| Less: Interest| 0| | 120,000| | 270,000| | 540,000| | 900,000| EBT| $2,000,000| | $1,880,000| | 1,730,000| | $1,460,000| | $1,100,000| ? Taxes @40%| 800,000| | 752,000| | 692,000| | 584,000| | 440,000| Net profit| $1,200,000| | $1,128,000| | $1,038,000| | $ 876,000| | $ 660,000| Less: Adopted dividends| 200,000| | 200,000| | 200,000| | 200,000| | 200,000| Profits accessible to ?common stock| $1,000,000| | $ 928,000| | $ 838,000| | $ 676,000| | $ 460,000| # shares outstanding| 200,000| | 170,000| | 140,000| | 110,000| | 80,000| EPS| $ 5. 00| | $ 5. 46| | $ 5. 99| | $ 6. 15| | $ 5. 75| b. Debt: 0%Debt: 15% Debt: 30%Debt: 45% Debt: 60% c. The optimal basic anatomy would be 30% debt and 70% disinterestedness because this is the debt/equity mix that maximizes the amount of the accepted stock. Chapter 16 Problem 16. For anniversary of the accommodation amounts, absorption rates, anniversary payments, and accommodation agreement apparent in the afterward table, account the anniversary absorption paid anniversary year over the appellation of the loan, bold that the payments are fabricated at the end of anniversary year. Loan| Amount| Rate| Anniversary Payment| Appellation (in years)| Absorption Paid Year 1| Year 2| Year 3| Year 4| Year 5| Year 6| A| $14,000| 10%| $4,416| 4 | $1400| $1098. 40| $766. 64| $401. 70| | | B| 17,500| 12%| 10,355| 2| 2100| 1109. 40| | | | | C| 2,400| 13%| 1,017| 3| 312| 220. 35| 116. 79| | | | D| 49,000| 14%| 14,273| 5| 6860| 5822. 18| 4639. 06| 3290. 31| 1752. 3| | E| 26,500| 16%| 7191| 6| 4240| 3767. 84| 3220. 13| 2584. 80| 1847. 80| 992. 89| Problem 16. 5 Charter against acquirement Northwest Lumber Company needs to aggrandize its facilities. To do so, the close charge access a apparatus costing $80,000. The apparatus can be busy or purchased. The close is in the 40% tax bracket, and its after-tax amount of debt is 9%. The agreement of the charter and acquirement affairs are as follows: Charter The leasing adjustment requires end-of-year payments of $19,800 over 5 years. All aliment costs will be paid by the lessor; allowance and another costs will be borne by the lessee. The aborigine will exercise its advantage to acquirement the asset for $24,000 at abortion of the lease. Acquirement If the close purchases the machine, its amount of $80,000 will be financed with a 5-year, 14% accommodation acute according end-of-year payments of $23,302. The apparatus will be attenuated beneath MACRS application a 5-year accretion period. (See Table 3. 2 on folio 108 for the applicative abrasion percentages. ) The close will pay $2,000 per year for a account arrangement that covers all aliment costs; allowance and another costs will be borne by the firm. The close affairs to accumulate the accessories and use it above its 5-year accretion period. a. Determine the after-tax banknote outflows of Northwest Lumber beneath anniversary alternative. Year| Charter after-tax outflows| Acquirement after-tax outflows| 1| $11,880| $13,622| 2| 11,880| 10,459. 71| 3| 11,880| 15,391. 10| 4| 11,880| 18,512. 89| 5| 35,880| 19,516. 93| b. Find the present amount of anniversary after-tax banknote address stream, application the after-tax amount of debt. Year| PV of outflows (Lease)| PV of outflows (Purchase)| 1| $10,893. 96| $12,491. 37| 2| 10,002. 96| 8,807| 3| 9,171. 6| 11,881. 93| 4| 8,411. 04| 13,107. 13| 5| 23,322| 12,686. 00| Total| $61,801. 32| $58,973. 51| c. Which alternative—lease or purchase—would you recommend? Why? The another that I would acclaim is the acquirement advantage because it has the lower present amount of after-tax banknote outflows as able-bodied as the best desirable. It is the best adorable because by purchasing the apparatus would be a beneath cher alternative. References Gitman, L. J. (2009). Principles of Managerial Finance (12th ed. ). Retrieved from https://ecampus. phoenix. edu/content/eBookLibrary2/content/eReader. aspx.

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