Chatsworth Corporation is an internet service provider which operates in eight states. The vice-president of finance calculated a 15 percent margin of safety, based on expected revenues of $500,000. What is the anticipated break-even point in revenues?
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Chatsworth Corporation is an internet service provider which operates in eight states. The vice-president of finance calculated a 15 percent margin of safety, based on expected revenues of $500,000.
What is the anticipated break-even point in revenues?
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- The Boyd Corporation has annual credit sales of $1.6 million. Currentexpenses for the collection department are $35,000, bad-debt losses are1.5%, and the days sales outstanding is 30 days. The firm is consideringeasing its collection efforts such that collection expenses will be reduced to$22,000 per year. The change is expected to increase bad-debt losses to 2.5%and to increase the days sales outstanding to 45 days. In addition, sales areexpected to increase to $1,625,000 per year.Should the firm relax collection efforts if the opportunity cost of funds is16%, the variable cost ratio is 75%, and taxes are 40%?It is December 31. Last year, Campbell Construction had sales of $80,000,000, and it forecasts that next year’s sales will be $76,000,000. Its fixed costs have been—and are expected to continue to be—$40,000,000, and its variable cost ratio is 21.00%. Campbell’s capital structure consists of a $15 million bank loan, on which it pays an interest rate of 8%, and 750,000 shares of common equity. The company’s profits are taxed at a marginal rate of 40%. The following are the two principal equations that can be used to calculate a firm’s DFL value: DFL (at EBIT = $X)=Percentage Change in EPSPercentage Change in EBITDFL (at EBIT = $X)=Percentage Change in EPSPercentage Change in EBIT DFL (at EBIT = $X)=EBITEBIT−Interest−Preferred Dividends(1 – Tax Rate)DFL (at EBIT = $X)=EBITEBIT−Interest−Preferred Dividends(1 – Tax Rate) Given this infromation, complete the following sentences: • The company’s percentage change in EBIT is ______(-12.26%/ -16.34%/ -13.62%) . • The percentage change…The S&H construction company expects to have total sales next year totaling $15,300. In addition, the firm pays taxes at 35 percent and will owe $280,000 in interest expense. Based on last year’s operations the firm’s management predicts that its cost of goods sold will be 57 percent of sales and operating expenses will total 32 percent. What is your estimate of firm’s net income after taxes for the coming year? Complete the forma income statement below Round to the nearest dollar Pro-forma income statement Sales Cost of goods sold Gross profit Operating expenses Net operating income Interest expenses Earnings before taxes Taxes Net income
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- Stubs-R-Us is a local event ticket broker. Last year, the company sold 760,000 tickets with an average commission of $10. Because of the general economic climate, Stubs expects ticket volume to decline by 20 percent. In addition, employees at a local insurance company headquarters accounted for 5 percent of Stubs’ volume. The headquarters relocated to another state and all the employees closed their accounts. Offsetting these factors is the observation that the average commission per sale is likely to increase by 15 percent because the average ticket prices are expected to be larger in the coming year. Required: Estimate commission revenues for Stubs-R-Us for the coming year.Nkusi Incorporated, provides consulting services to city water authorities. The consulting firm’s contribution-margin ratio is 20 percent, and its annual fixed expenses are $198,000. The firm’s income-tax rate is 40 percent. Required: Calculate the firm’s break-even volume of service revenue. How much before-tax income must the firm earn to make an after-tax net income of $ 55,800? What level of revenue for consulting services must the firm generate to earn an after-tax net income of $ 55,800 Suppose the firm’s income-tax rate rises to 45 percent. What will happen to the break-even level of consulting service revenue?The Raattama Corporation had sales of $3.5 million last year, and it earned a 5% return (after taxes) on sales. Recently, the company has fallen behind in its accounts payable. Although its terms of purchase are net 30 days, its accounts payable represents 60 days’ purchases. The company’s treasurer is seeking to increase bank borrowing in order to become current in meeting its trade obligations (that is, to have 30 days’ payables outstanding). The company’s balance sheet is as follows (in thousands of dollars): How much bank financing is needed to eliminate the past-due accounts payable? Assume that the bank will lend the firm the amount calculated in part a. The terms of the loan offered are 8%, simple interest, and the bank uses a 360-day year for the interest calculation. What is the interest charge for 1 month? (Assume there are 30 days in a month.) Now ignore part b and assume that the bank will lend the firm the amount calculated in part a. The terms of the loan are 7.5%, add-on interest, to be repaid in 12 monthly installments. What is the total loan amount? What are the monthly installments? What is the APR of the loan? What is the effective rate of the loan? Would you, as a bank loan officer, make this loan? Why or why not?