Individual Financing Problem Ch 20

Chapter 20, Problem 1 crocked A has $10,000 in assets totally financed with equity. solid B also has $10,000 in assetsbut these assets argon financed by $5,000 in debt (with a 10 per centum rate of absorb)and $5,000 in equity. some(prenominal) theatres sell 10,000 units of output at $2.50 per unit. The variable be of occupation are $1, and fixed production costs are $12,000. (To loosening the calculation, assume no income tax.) a. What is the operational income (EBIT) for both unassailables? gross gross gross revenue Revenue: 10,000 x $2.50= $25,000.00 variable quantity cost: 10,000 x $1= $10,000.00 Fixed equal: $12,000.00 EBIT: $3,000.00 For BOTH FIRMS b. What are the cyberspace laterward liaison? Firm AFirm B EBIT $3,000.00 $3,000.00 vex 0 500 $3,000.00 $2,500.00 c. If sales development by 10 percent to 11,000 units, by what luck will each firms earnings subsequently interest step-up? To exhaust the question, determine the earnings after taxes and compute the destiny increase in these earnings from the answers you derived in part b. Firm AFirm B sales Revenue: 11,000 x $2.50= $27,500.00 $27,500.00 changeable Cost: 11,000 x $1= $11,000.00 $11,000.00 Fixed Cost: $12,000.00 $12,000.

00 EBIT $4,500.00 $4,500.00 get: 0500 $4,500.00 $4,000.00 50%60%Increases d. wherefore are the percentage changes divers(prenominal)? The percentage changes are polar because of the interest Firm B is paying on their debt interest. The debt interest is $500, disregarding of the sales. As sales increase, it becomes a smaller percentage of what is deducted from the sales. When 10,000 units were sold,...If you urgency to get a full essay, order it on our website: Ordercustompaper.com

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