Pablo has been hired to advise the Automotores company, which is dedicated to the production of automobiles. It is a new company, with a large capital investment. You are asked to study and observe the financial aspects of the business. This company was founded in January 2016 and currently produces only one car: the Puma. However, the board of directors sees good possibilities to produce two other models. The company has total assets of $ 256,000 The tax rate is 40% At the 2017 sales level, 35% of the cost of sales is fixed, and the rest is variable a) Determine unit sales if shareholders want a 25% return (on assets) before taxes. b) Determine sales in pesos if shareholders want a 15% after-tax return on assets, considering a 10% increase in fixed costs, and assuming a 30% tax rate and a 10% profit sharing. c) How many units will need to be sold if the pre-tax profit goal is 25% of sales?
Pablo has been hired to advise the Automotores company, which is dedicated to the production of automobiles. It is a new company, with a large capital investment. You are asked to study and observe the financial aspects of the business. This company was founded in January 2016 and currently produces only one car: the Puma. However, the board of directors sees good possibilities to produce two other models.
The company has total assets of $ 256,000
The tax rate is 40%
At the 2017 sales level, 35% of the cost of sales is fixed, and the rest is variable
a) Determine unit sales if shareholders want a 25% return (on assets) before taxes.
b) Determine sales in pesos if shareholders want a 15% after-tax return on assets, considering a 10% increase in fixed costs, and assuming a 30% tax rate and a 10% profit sharing.
c) How many units will need to be sold if the pre-tax profit goal is 25% of sales?
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