UPENN: LOOSE LEAF CORP.FIN W/CONNECT
17th Edition
ISBN: 9781260361278
Author: Ross
Publisher: McGraw-Hill Publishing Co.
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Question
Chapter 7, Problem 20QP
a)
Summary Introduction
To determine: The accounting break-even point.
Introduction:
Accounting break-even point refers to a point where the company faces zero profits.
b)
Summary Introduction
To determine: Financial break-even point
Introduction:
Financial break-even point refers to the point of earnings before interest and taxes (EBIT) which is equal to fixed financial cost inclusive of preference dividend and interest.
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Outline of the case
Jessica Hernandez wanted to open a retail outlet in a mall where she could sell gadgets. As her
business started to grow, she realized she would soon need to hire one or two people and that will
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borrowing. She plans to borrow $7,600 for 2 years however she doesn't have a very good credit
rating so most finance companies want to charge her a high-interest rate. She finally finds a lender
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Discussion Question:
1. How much interest will Jessica have to pay to the lender?
2. If you were Jessica, will you lend money at a higher interest rate? Why?
3. What other options are available and what should she do, aside from borrowing money.
4. Assume Hernandez has successfully managed her business for several years. List five
possible reasons she may still need to borrow from time to time.
Let's say you showed your friend Cardi all these calculations, and she went, "Man, this is screwed up! Credit cards are a racket!" (Yes, Cardi, they are - if you don't pay your balance in full every month, that is.)
But it's not all bad news, you tell Cardi. There is something she can do in order to reduce both her cost of borrowing and the length of time she'll be in debt. What can she do? (check all answers that apply)
a.
Ask her credit card company to shorten the duration of the loan.
b.
Make her payments earlier in the month rather than later.
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Transfer the balance to a lower interest card with another bank.
d.
Complain to the Consumer Financial Protection Bureau.
e.
Pay more than $400 every month.
f.
Ask her credit card company to lower the 29% interest rate.
g.
Occasionally make additional payments to the account.
Chapter 7 Solutions
UPENN: LOOSE LEAF CORP.FIN W/CONNECT
Ch. 7 - Forecasting Risk What is forecasting risk? In...Ch. 7 - Sensitivity Analysis and Scenario Analysis What is...Ch. 7 - Prob. 3CQCh. 7 - Break-Even Point As a shareholder of a firm that...Ch. 7 - Prob. 5CQCh. 7 - Real Options Why does traditional NPV analysis...Ch. 7 - Real Options The Mango Republic has just...Ch. 7 - Prob. 8CQCh. 7 - Prob. 9CQCh. 7 - Project Analysis You are discussing a project...
Ch. 7 - Sensitivity Analysis and Break-Even Point We are...Ch. 7 - Prob. 2QPCh. 7 - Prob. 3QPCh. 7 - Prob. 4QPCh. 7 - Prob. 5QPCh. 7 - Decision Trees Ang Electronics. Inc., has...Ch. 7 - Decision Trees The manager for a growing firm is...Ch. 7 - Prob. 8QPCh. 7 - Prob. 9QPCh. 7 - Financial Break-Even Niko has purchased a brand...Ch. 7 - Prob. 11QPCh. 7 - Prob. 12QPCh. 7 - Project Analysis You are considering a new product...Ch. 7 - Project Analysis McGilla Golf has decided to sell...Ch. 7 - Prob. 17QPCh. 7 - Prob. 18QPCh. 7 - Prob. 19QPCh. 7 - Prob. 20QPCh. 7 - Prob. 21QPCh. 7 - Option to Wait Hickock Mining is evaluating when...Ch. 7 - Abandonment Decisions Allied Products, Inc., is...Ch. 7 - Prob. 24QPCh. 7 - Scenario Analysis You are the financial analyst...Ch. 7 - Scenario Analysis Consider a project to supply...Ch. 7 - Sensitivity Analysis In Problem 26, suppose youre...Ch. 7 - Prob. 28QPCh. 7 - Prob. 29QPCh. 7 - Financial Break-Even The Cornchopper Company is...
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