Number of products produced and sold 200,000 units. The selling price of each unit is 17,000 Rials and the variable costs of each unit are 12,000 Rials, the fixed cost is 37.5 million Rials, the interest cost is 200,000,000 Rials, the preferred dividend is 140 million Rials, the number of ordinary shares is 50,000 shares, the tax rate is 40%. It is desirable: A) Profit before interest, and tax Ebit B) Earnings per share Eps C) Qb operational head-to-head point D)QL operational lever E) Financial leverage FL
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A: Note: This post contains several questions. The first three have been solved below.
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A:
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- Aruz Berhad sells its product at RM45 per unit. Fixed cost per year is RM220,000 while variable cost is RM15 per unit. The firm has debt capital of RM450,000 and its interest rate is 7%. Firm tax rate is 30% and the total number of shares issued is 300,000 units. You are required to: Calculate earnings before interest and tax (EBIT) and earnings per share (EPS) at total sales of 15,000 units. Calculate the degree of financial leverage at sales level of 15,000 units.The Hurricane Lamp Company forecasts that next year’s sales will be $6 million. Fixed operating costs are estimated to be $800,000, and the variable cost ratio (that is, variable costs as a fraction of sales) is estimated to be 0.75. The firm has a $600,000 loan at 12 percent interest. It has 20,000 shares of $2.5 preferred stock and 40,000 shares of common stock outstanding. Hurricane Lamp is in the 40 percent corporate income tax bracket. Forecast Hurricane Lamp’s earnings per share (EPS) for next year. Develop a complete income statement using the revised format illustrated in Table 14.1. Then determine what Hurricane Lamp’s EPS would be if sales were 12 percent above the projected $6 million level. Round your answers to the nearest cent.EPS1: $ EPS2: $ Calculate Hurricane Lamp’s degree of operating leverage (DOL) at a sales level of $6 million using the following formulas. The definitional formula (Equation 14.1). Round your answer to three decimal places. The simpler,…Yor Inc. most recently sold 200,000 units at P12.00 each; its variable operating costs are P9.00 per unit, and its fixed operating costs are P400,000. Annual interest charges total P75,000, and the firm has 1,000 shares of P10 (annual dividend) preferred stock outstanding. It currently has 5,000 shares of common stock outstanding. Assume that the firm is subject to a 25% tax rate. Questions: At what level of sales (in units) would the firm break even on operations? (Round off final answer to the nearest peso) Calculate the firm’s earnings per share (EPS) in tabular form at the current level of sales. (Round off final answer to the nearest centavo or two decimal places) Calculate the firm’s earnings per share (EPS) in tabular form at a 220,000-unit sales level. (Round off final answer to the nearest centavo or two decimal places) Using the current P2,400,000 level of sales as a base, calculate the firm’s degree of operating leverage (DOL). (Round off final answer to the nearest two…
- McMichael, Inc has expected sales of $40 million. Fixed operating cost is $5 million and the variable cost ratio is 65 percent. They have outstanding debt of $10 million at an interest rate of 10 percent and $3million in a 12 percent bond. McMichael has 250,000 shares of preferred stock with a $10 dividend and 1 million shares of outstanding common stock. Their average tax rate is 35% and marginal tax rate is 40%. What is the company’s DOL at its current sales level. What is their current DFL? Forecast McMichael’s EPS if sales drop to $38 million.2). annually. Company’s annual sales are OMR (4) million, its tax rate is 30%, and its rate on equity (ROE) is 20% and tota asset (TA)was OMR (1500) thousand. Omani Company sold .product at OMR 5.50 per unit; its variable operating costs are OMR (2.5) per unit -:Answer the following .Calculate the firm’s degree of Operating leverage a) .Calculate the firm’s degree of financial leverage b) ?What is the combine effect of fixed Operating and Financial Costs c)The Omani Company has OMR (800) thousand of total debt (Liabilities) outstanding (Liabilities), and it pays an interest of OMR (80) thousandThe company has P3,000,000 sales. The variable costs are equal to fifty cents for every peso of sales. The fixed costs are estimated to be P100,000. The company has P1,000,000 debt outstanding at a before-tax cost of 10%. How much of a percentage increase would you expect in the company's net income if their sales were to increase by 20%? A. 18.33% B. 19.24% C. 21.50% D. 23.08%
- Wandel Inc. has $5,000,000 outstanding of 8 percent preferred stock; the company has a 40 percent tax rate. What is the after-tax cost of the preferred stock? and if Wandel Inc. has forecasted sales of $300,000. The firm's fixed operating costs total $75,000 and its variable operating costs are equal to 70% of this sales level. The company needs to pay $12,000 in interest each period. Its tax rate is 40% and it has 10,000 shares. a) Compute the earnings before interest and taxes (EBIT) for a sales level of $300,000 b) Compute Earnings after taxes and compute the EPS for that sales level.McGee Corporation has fixed operating costs of $14 million and a variable cost ratio of 0.60. The firm has a $16 million, 8 percent bank loan and a $4 million, 13 percent bond issue outstanding. The firm has 0.8 million shares of $5 (dividend) preferred stock and 2.9 million shares of common stock ($1 par). McGee’s marginal tax rate is 40 percent. Sales are expected to be $120 million. Compute McGee’s degree of operating leverage at an $120 million sales level. Round your answer to two decimal places. Compute McGee’s degree of financial leverage at an $120 million sales level. Round your answer to two decimal places. If sales decline to $114 million, forecast McGee’s earnings per share. Round your answer to the nearest cent.$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…
- DUMBA Inc. has fixed operating costs of $2.6 million and its variable cost ratio is .30. It has $4 million in bonds outstanding with a coupon rate of 12%. It has 1 million shares of $1.75 preferred stock and 1 million shares of common stock outstanding. DUMBA has a 40% tax rate, and sales are $14.2 million. What is DUMBA's DCL?Your corporation sells a product for $10 per unit. The variable expenses are $6 per unit, and the fixed expenses total $35,000 per period. By how much will net operating income change if sales are expected to increase by $40,000?Coats Corp. generates $10,000,000 in sales. Its variable costs equal 85 percent of sales and its fixed costs are $500,000. Therefore, the company’s operating income (EBIT) equals $1,000,000. The company estimates that if its sales were to increase 10 percent, its net income and EPS would increase 17.5 percent. What is the company’s interest expense? (Assume that the change in sales would have no effect on the company’s tax rate.) $100,000 $105,874 $111,584 $142,857 $857,142