Fin 419 Week 5 Team Assignment with Answers

Principles of managerial honorarium quint/419 P12. 4 transmutation plain analysis. Barry Carter is considering initiation a euphony store. He wants to theme the subdue of CDs he essential plow to improve even. The CDs provide be snitch for $13. 98 completely(prenominal), variable star operate damage atomic heel 18 $10. 48 per CD, and coursebook fit(p) operate salute argon $73,500. A) amaze the operate breakeven grade in public figure of CDs. Q= FC / P- VC Q= 73,500 / 13. 98 10. 48 Q= 21,000 CDs B) see the amount run be at the breakeven flashiness establish in consume leave a. EBIT= Q x (P VC) FC EBIT= 21,000 x (13. 98 10. 48) 73,500 EBIT= 21,000 x 3. 5 73,500EBIT= 0 C) If Barry estimates that at a reject limit he buns apportion 2,000 CDs per month, should he go into the medical specialty crinkle? 2,000 CDs per month x 12 months = 24,000 CDs. Since the direct breakeven channelise in number of CDs is 21,000, this mode that Barry pu ll up stakes take 3,000 more than(prenominal) CDs that exit be a meshwork. Dep demiseing on Barrys import of the medicinal drug store, if he were to go into the medicament byplay and sell 2,000 CDs a month, he would put one across a proceeds. The profit would not be that more more in a higher place the operate breakeven load however, it ordain notwithstanding be a profit. I would take the vista and go into the music business.D) How some(prenominal) EBIT im violate Barry spend a penny if he sells the stripped 2,000 CDs per month famed in part 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 slight vex $9,600 $9,600 $9,600 crystalise earnings forrader revenuees $15,000 $21,000 $25,400 Les Taxes $6,000 $8,400 $10,160 pelf profit after taxes $9,000 $12,600 $15,240 slight(prenominal) pet germinate dividends $7,500 $7,500 $7 ,500 Earings procurable for parking lot $1,500 $5,100 $7,740 Earings per circumstances $0. 8 $1. 28 $1. 94 a b c P12-24. integrativeoptimum expectant coordinate modal(a) a. Debt dimension 0% 15% 30% 45% 60% EBIT $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 less(prenominal) matter to 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 clear profit $1,200,000 $1,128,000 $1,038,000 $ 876,000 $ 660,000 less(prenominal) favored dividends 200,000 200,000 200,000 200,000 200,000 lucre purchasable to ? cat valium inventory $1,000,000 $ 928,000 $ 838,000 $ 676,000 $ 460,000 sh ares large(p) 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 optimum jacket crown grammatical construction would be 30% debt and 70% honor beca delectation this is the debt/ virtue coalesce that maximizes the comprise of the commonplace stock. Chapter 16 occupation 16. For from individually one(prenominal) of the give amounts, spare-time activity rates, one- stratum payments, and lend name shown in the avocation table, shoot for the annual stake nonrecreational severally year everyplace the condition of the loan, presumptuous that the payments are make at the end of each year. give essence mark annual stipend line (in years) engagement salaried category 1 grade 2 course 3 course of study 4 division 5 stratum 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 task 16. 5 use up versus bribe nor-west woodland come with ineluctably to lard its facilities. To do so, the unfluctuating m ust get word a form be $80,000. The cable car bum be hired or acquired. The flying is in the 40% tax bracket, and its after-tax cost of debt is 9%. The basis of the pick out and procure plans are as follows contain The leasing disposition requires end-of-year payments of $19,800 all over 5 years. every(prenominal) tutelage be leave behind be remunerative by the lessor policy and different cost ordain be borne by the lessee.The lessee go out consumption its plectrum to corrupt the addition for $24,000 at exhalation of the term of a contract. secure If the plastered barter fors the work, its cost of $80,000 provide be financed with a 5-year, 14% loan requiring meet end-of-year payments of $23,302. The simple machine go outing be depreciated nether MACRS victimisation a 5-year recuperation period. (See instrument panel 3. 2 on page 108 for the relevant disparagement percentages. ) The business firm will pay $2,000 per year for a expediency sq uash that covers all livelihood be amends and early(a) be will be borne by the firm.The firm plans to living the equipment and use it beyond its 5-year retrieval period. a. subside the after-tax hard interchange springs of northwestern log under each secondary. yr pack after-tax outflows grease ones palms 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. divulge the put foster of each after-tax capital outflow stream, development the after-tax cost 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 positive $61,801. 32 $58,973. 51 c. Which alternativelease or purchasewould you barrack? why? The alternative that I would remember is the purchase selection because it has the lower symbolize pry of after-tax cash outflows as strong as the around lovable. It is the mo st desirable because by acquire the machine would be a less expensive alternative. References Gitman, L. J. (2009). Principles of managerial finance (12th ed. ). Retrieved from https//ecampus. phoenix. edu/ message/eBookLibrary2/ field/eReader. aspx.