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Darina [25.2K]
3 years ago
12

Local Co. has sales of $ 10.8 million and cost of sales of $ 5.7 million. Its​ selling, general and administrative expenses are

$ 550,000 and its research and development is $ 1.2 million. It has annual depreciation charges of $ 1.2 million and a tax rate of 35 %.
a. What is Local's gross margin? (answer in %, Round to one decimal place.)b. What is Local's operating margin? (answer in %, Round to one decimal place.)c. What is Local's net profit margin? (answer in %, Round to two decimal places.)
Business
1 answer:
DaniilM [7]3 years ago
3 0

Answer:

Gross profit Margin = 47.2%

Operating profit margin = 19.9%

Net Profit Margin = 12.93%

Explanation:

Requirement A:  Gross profit margin

Gross Profit = Sales - Cost of sales

Gross Profit = 5.1m

Gross profit Margin = Gross profit/Sales x 100

Gross profit Margin = 5.1/10.8 x 100

Gross profit Margin = 47.2%

Requirement B: Operating profit margin

Operating profit margin = Operating Profit/ Sales x 100

Operating Profit = Gross Profit - selling,general and administrative expense -research and development - depriciation

Operating Profit = 5.1m - 0.55m - 1.2m - 1.2m

Operating Profit = 2.15m

Operating profit margin = 2.15m/10.8m x 100

Operating profit margin = 19.9%

Requirement C: Net profit Margin

Net Profit margin = Net profit / Sales x100

Net Profit = Operating profit - tax

Net Profit = 2.15m - (2.15m x 35%)

Net Profit = 2.15m - 0.7525m

Net Profit = 1.3975m

Net Profit Margin = 1.3975m/10.8m x 100

Net Profit Margin = 12.93%

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You purchased 1,000 shares of the New Fund at a price of $20 per share at the beginning of the year. You paid a front-end load o
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Answer:

6.37%

Explanation:

Rate of return

= (Aggregate investment value after one year - Investment value) / investment value   ----- equation 1

Cost of shares =number of shares* price per share

             = 1000* $20 =$20,000

Total amount invested = Purchasing cost /(1- front-end load)

               = $20,000 / (1-0.04)

                =$20,000 / 0.96 = $20,833.333

Investment value after one year

           = Total Investment*( 1+ price increase-expense ratio)

         = $20,000( 1 +0.12 -0.012)

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From equation 1 above

Rate of return = ($22,160 - $ 20,833.333) / $20,833.333

        $ 1,326.667 / $ 20,833.333

= 0.06368001701

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Since rates of return are expressed as %, we multiply the result by 100 to get

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My rate of return on the fund will be 6.37% if I sell the shares at the end of the year.

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3 years ago
The probability of low demand is estimated to be 0.20. The after-tax net present value of the benefits from purchasing the two m
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Answer:  a)The decision tree is attached as a document to this question.

b)$140000

Here is the complete question:

. A manager is trying to decide whether to buy one machine or two. If only one is purchased and demand proves to be excessive, the second machine can be purchased later. Some sales will be lost, however, because the lead time for purchasing this type of machine is 6 months. In addition, the cost per machine will be lower if both are purchased at the same time. The probability of low demand is estimated to be 0.20. The after-tax net present value of the benefits from purchasing the two machines together is $90,000 if demand is low and $180,000 if demand is high.

If one machine is purchased and demand is low, the net present value is $120,000. If demand is high, the manager has three options. Doing nothing has a net present value of $120,000; subcontracting, $160,000; and buying the second machines, $140,000.

a. Draw the decision tree for this problem.

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Explanation:

Concepts and reason

The expected value of perfect information (EVPI)= EPPI - EP

(EPPI) =expected payoff with perfect information

(EP)= maximum expected payoff  computed under uncertainty.

Fundamentals

The expected payoff = P₁X₁ + P₂X₂ +....PnXn,

The formula for the expected payoff is, E(X) = ΣxΡ(x)

Suppose you have a set of corresponding probabilities for playing your pure strategies = Pn

where the probabilities must all be greater than or equal to zero and they all sum to one.

b) the values at node 4 = $120000, $140000 and $160000

EV =maximum(node4)

=max($120000, $140000 , $160000)

=$140000

expected payoff at node 4 = $140000

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Answer:

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