The company BAC inc. sells a single product for $ 5 a unit. Its annual fixed operating costs are estimated at $ 180,000 including $ 30,000 in depreciation. Its unit variable cost is estimated at $ 2. The amount of interest paid annually to bondholders is $ 45,000. The corporate tax rate is 35%. a) Estimate the general breakeven point of the business? b) Estimate the company's cash flow breakeven point? c) Estimate the operating leverage of the business at a sales level of d) 120,000 units? e) Estimate the company's financial leverage for an EBIT of $ 50,000? f) Estimate the total leverage of the business at a sales level of 80,000 units?
The company BAC inc. sells a single product for $ 5 a unit. Its annual fixed operating costs are estimated at $ 180,000 including $ 30,000 in depreciation. Its unit variable cost is estimated at $ 2. The amount of interest paid annually to bondholders is $ 45,000. The corporate tax rate is 35%. a) Estimate the general breakeven point of the business? b) Estimate the company's cash flow breakeven point? c) Estimate the operating leverage of the business at a sales level of d) 120,000 units? e) Estimate the company's financial leverage for an EBIT of $ 50,000? f) Estimate the total leverage of the business at a sales level of 80,000 units?
Chapter16: Financial Planning And Control
Section: Chapter Questions
Problem 20PROB
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The company BAC inc. sells a single product for $ 5 a unit. Its annual fixed operating costs are estimated at $ 180,000 including $ 30,000 in
a) Estimate the general breakeven point of the business?
b) Estimate the company's cash flow breakeven point?
c) Estimate the operating leverage of the business at a sales level of
d) 120,000 units?
e) Estimate the company's financial leverage for an EBIT of $ 50,000?
f) Estimate the total leverage of the business at a sales level of 80,000 units?
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VIEWStep 5 (e) company's financial leverage for an EBIT of $ 50,000
VIEWStep 6 (f) total leverage of the business at a sales level of 80,000 unit
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