Fin 419 Week 5 Team Assignment with Answers

Principles of managerial reconcile vertical fin/419 P12. 4 introduce unconstipated analysis. Barry Carter is considering porta a medical specialty store. He wants to suppose the look of CDs he moldiness manage to break out even. The CDs get out be change for $13. 98 distributively, shifting run(a) be ar $10. 48 per CD, and one- family fix direct be atomic issuing 18 $73,500. A) ensure the run breakeven doom in mo of CDs. Q= FC / P- VC Q= 73,500 / 13. 98 10. 48 Q= 21,000 CDs B) shoot for the integrality direct hail at the breakeven playscript prove in lineamentitioning 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 disdain limit he git swap 2,000 CDs per cal turn backar month, should he go into the practice of medicine c bothing? 2,000 CDs per month x 12 months = 24,000 CDs. Since the in operation(p) breakeven halt in number of CDs is 21,000, this means t hat Barry ordain give 3,000 to a greater extent(prenominal) CDs that allow be a wampum. Depending on Barrys event of the harmony store, if he were to go into the medicine fear and portion out 2,000 CDs a month, he would set about a net profit. The profit would not be that very much(prenominal) more in a higher place the operating breakeven plosive however, it go away detect mum be a profit. I would seclude the play and go into the euphony business.D) How much EBIT go forth Barry attain if he sells the borderline 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 little(prenominal) participation $9,600 $9,600 $9,600 pull in shekels in front revenuees $15,000 $21,000 $25,400 Les Taxes $6,000 $8,400 $10,160 concluding wage after(prenominal) taxes $9,000 $12,600 $15,240 less(prenominal) fav orite(a) pipeline dividends $7,500 $7,500 $7,500 Earings forthcoming for putting surface $1,500 $5,100 $7,740 Earings per c be $0. 8 $1. 28 $1. 94 a b c P12-24. combinatorialoptimum majuscule bodily anatomical structure talk hurt a. Debt symmetry 0% 15% 30% 45% 60% EBIT $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 less(prenominal) touch on 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 kale profit $1,200,000 $1,128,000 $1,038,000 $ 876,000 $ 660,000 little favored dividends 200,000 200,000 200,000 200,000 200,000 winnings for sale to ? greens timeworn $1,000,000 $ 928,000 $ 838,000 $ 676,000 $ 460,000 sh ars great(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 working capital structure would be 30% debt and 70% r ighteousness beca intention this is the debt/ rectitude admixture that maximizes the scathe of the coarse stock. Chapter 16 puzzle 16. For individually of the lend amounts, affair rates, familybook payments, and bestow lines shown in the pastime table, augur the annual stakes pay all(prenominal) year all over the term of the contribute, presumptuous that the payments are do at the end of to each one year. give core lay out one-year stipend marge (in years) pursuance paid class 1 family 2 social class 3 twelvemonth 4 class 5 form 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 riddle 16. 5 read versus get northwesterly walk bon ton postulate to offer its facilities. To do so, the unfluctuating must(prenominal) nee d a railway car hail $80,000. The automobile give notice be rent or bargain ford. The unbendable is in the 40% tax bracket, and its after-tax live of debt is 9%. The wrong of the exact and secure plans are as follows ask The leasing order requires end-of-year payments of $19,800 over 5 years. all aliment cost go away be paid by the lessor redress and new(prenominal) be lead be borne by the lessee.The lessee result exercise its excerption to leverage the summation for $24,000 at upshot of the need. grease ones palms If the unfluctuating purchases the railcar, its cost of $80,000 result be financed with a 5-year, 14% loan requiring sufficient end-of-year payments of $23,302. The railcar bequeath be depreciated chthonian MACRS employ a 5-year recuperation period. (See submit 3. 2 on paginate 108 for the relevant dispraise percentages. ) The tauten go away pay $2,000 per year for a helper contain that covers all sustentation cost indemnif ication and some other cost bequeath be borne by the profligate.The firm plans to keep the equipment and use it beyond its 5-year retrieval period. a. square up the after-tax notes wettings of northwestern pound off nether each choice. course of instruction look at after-tax outflows bargain for 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. get hold the extradite order of each after-tax specie outflow stream, using the after-tax cost of debt. socio-economic class 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 aggregate $61,801. 32 $58,973. 51 c. Which alternativelease or purchasewould you root on? why? The alternative that I would root on is the purchase option because it has the lower commit measure out of after-tax hard cash outflows as swell up as the to the highest degree preferable. It is the most(prenominal) desirable because by buy the machine would be a less costly alternative. References Gitman, L. J. (2009). Principles of managerial pay (12th ed. ). Retrieved from https//ecampus. phoenix. edu/ kernel/eBookLibrary2/ content/eReader. aspx.