Naylor Company had $210,000 of net income in 2016 when the selling price per unit was $150, the variable costs per unit were $90, and the fi xed costs were $570,000. Management expects per unit data and total fi xed costs to remain the same in 2017. The president of Naylor Company is under pressure from stockholders to increase net income by $52,000 in 2017. Instructions (a) Compute the number of units sold in 2016. (b) Compute the number of units that would have to be sold in 2017 to reach the stockholders’ desired profi t level. (c) Assume that Naylor Company sells the same number of units in 2017 as it did in 2016. What would the selling price have to be in order to reach the stockholders’ desired profi t level?

Naylor Company had $210,000 of net income in 2016 when the selling price per unit was $150, the variable costs per unit were $90, and the fi xed costs were $570,000. Management expects per unit data and total fi xed costs to remain the same in 2017. The president of Naylor Company is under pressure from stockholders to increase net income by $52,000 in 2017. Instructions (a) Compute the number of units sold in 2016. (b) Compute the number of units that would have to be sold in 2017 to reach the stockholders’ desired profi t level. (c) Assume that Naylor Company sells the same number of units in 2017 as it did in 2016. What would the selling price have to be in order to reach the stockholders’ desired profi t level?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter12: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 6P

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