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A new restaurant is ready to open for business. It is estimated that the food cost (variable cost) will be 40% of sales, while fixed cost will be $450,000. The first year's sales estimates are $1,250,000. The cost to start up this restaurant will be $2,000,000. Two financing alternatives are being considered: a) 50% equity financing and 50% debt at 12%, or b) all equity financing. Common stock can be sold at $5 per share.
a) Compute the Operating Break-even point in dollars.
b) Compute DOL.
c) Compute DFL and DCL for both financing plans.
Rock Bottom Carpets sells 5,600 carpets a year at an average price per carpet of $1,490. The carrying cost per unit is $22.37. The company orders 500 carpets at a time and has a fixed order cost of $69 per order. The carpets are sold out before they ..
Managing the product through successive stages of the product life cycle is an important role for a product manager. Assess the three ways to manage a product through its life cycle, including examples to help clarify your assessment. Indicate the re..
Find the sustainable and internal growth rates for a firm with the following ratios: asset turnover = 1.40; profit margin = 8%; payout ratio = 25%; equity/assets = .70.
Determine whether the equations defines y as a linear function ? In a poll conducted among 180 active investors, it was found that 100 use discount brokers 122 use full- service brokers and 54 use both discount and full time services brokers. How man..
The risk free rate is 4%, and the expected return on the market is 12%. There is also an asset X with a Beta of 1.5.What is the return on portfolio 1 consisting of 40% of asset X and the rest in an asset with no risk? What is the return on portfolio ..
Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt−equity ratio of .75. It’s considering building a new $60 million manufacturing facility. A new issue of common stock: The flotation ..
suppose that the assets of a bank consist of 500 million of loans to bbb-rated corporations. the pd for the
You manage an equity fund with an expected risk premium of 11.6% and a standard deviation of 30%. The rate on Treasury bills is 6.2%. Your client chooses to invest $60,000 of her portfolio in your equity fund and $140,000 in a T-bill money market fun..
The exercise price on one of ORNE Corporation's call options is $25 and the price of the underlying stock is $29. The option will expire in 35 days and is currently selling at $5.50. Calculate the option's exercise value? What is the significance of ..
Show that, when the expected return of S increases by λσS, the growth rate of G increases by λσG, where λ is a constant.
A 7-year, 11.00% semiannual coupon bond with a par value of $1000 may be called in 5 years at a call price of $1,155.00. The bond sells for $970.50. (Assume that the bond has just been issued.). What is it’s yield to maturity?
Shao Airlines is considering two alternative planes. Plane A has an expected life of 5 years, will cost $100 million and will produce net cash flows of $29 million per year. Plane B has a life of 10 years, will cost $132 million and will produce net ..
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