Each unit sells: $80
Each unit costs to make: $32
Fixed costs: 72,000
Goal: 2,000 units sold
If they meet their goal, let's see how that would go:
(2,000 * 80) - (2,000 * 32) - 72,000 = ?
160,000 - 64,000 - 72,000 = 24,000
24,000 is the profit they would make for hitting their goal.
Question 1:
What is the break-even point? The break-even means they make no money, but they also lose no money. So that final number (24,000) would be 0 instead. How many units would they have to make to hit zero?
(x * 80) - (x * 32) - 72,000 = 0.
80x - 32x = 72,000
48x = 72,000
x = 1500 units
We can verify by using our first formula we've already determined, using this new value for units.
(1,500* 80) - (1,500 * 32) - 72,000 = ?
120,000 - 48,000 - 72,000 = 0? True!
Question 2: If they increase their expenses by 16,000, what is their new break even point?
(x * 80) - (x * 32) - 72,000 - 16000 = 0.
80x - 32x - 88000 = 0
48x = 88000
x = 1833
Question 3: 10% reduction in selling price and 10% increase in sales. (Assuming based off the original formula the problem provided.)
Original: (2,000 * 80) - (2,000 * 32) - 72,000 = ?
10% Reduction in price: 8
80-8 = 72
10% increase in sales: 200
2000 + 200 = 2200
Plugin to our formula:
(2200 * 72) - (2200 * 32) - 72,000 = ?
158400 - 70400 - 72,000 = 16,000
Since this number is positive, this is income. (D)
It would probably be a résumé because they always hold onto it so they can consider it when there are job openings
B. False
Explanation: you do not need a college degree to enter the military
Answer:
The answer is: Annuity B has a smaller present value than annuity A.
Explanation:
The present value is the current value of a future cash flow. Money today is worth more than money earned tomorrow or in a year. So the sooner you receive a payment, its present value will be higher.
For this question, annuity A starts paying TODAY (higher present value), while annuity B starts paying in ONE MONTH.
Answer:
See the explanation for the answers.
Explanation:
(a)
Year
0 1 2 3
Cost of Equipment= 237500 0 0 0
Base price +
Modification
Cost
Working Capital 13000 0 0 -1300
Saving in 0 57000 57000 57000
Labor Cost
Depreciation(%) 0 33% 45% 15%
Depreciation 0 78375 106875 35625
.Book Value 237500 159125 52250 16625
.Salvage Value 0 0 0 57000
.After Tax 0 0 0 40850
Salvage Value
.Cash Flow -250500 65550 76950 102300
.Discounted Cash -250500 57500 59210.5 69049.59
Flow at 14%
NET VALUE -64739.89
(a)
Initial Investment / Cash Flow in year 0 = Cost of Equipment + Increase in working capital
= 237500 + 13000
=$250,500
Cash Flows in Years 1 and 2 = (Saving in Labor Cost - Depreciation) * (1 - Tax Rate) + Depreciation
Cash Flow in year 3 = (Saving in Labor Cost - Depreciation) * (1 - Tax Rate) + Depreciation + Recovery of Working Capital + After Tax Salvage Value
After Tax Salvage Value = Salvage Value - (Salvage Value - Book Value) * Tax Rate
= 57000 - (57000 - 16625) * 0.4
= $40,850
(b)
Year Cash Flow
1 $65550
2 $76950
3 $102300
(c)
If WACC is 14%, the net present value of the project is -$64,739.89. Since NPV is negative, the barometer should not be purchased.
