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Company X has a sales price of $4.00 per unit and a variable cost of $3.40 per unit; fixed costs are $13,000, no debt, and sales of 250,000 units per year. Company Y has a sales price of $10.00 per unit and a variable cost of $7.00 per unit with fixed costs of $135,000 and sales of 200,000 units per year. Company Y also has interest payments of $60,000 annually. Both companies are in the 40% tax bracket.
a. compute DOL, DFL, and DCL for Company X
b. compute DOL, DFL, and DCL for Company Y
c. compare the relative risk of both companies
Although appealing to more refined tastes, art as a collectible has not always performed so profitably. What was his annual rate of return on this sculpture?
Recently, many foreign firms from both developed and developing countries acquired high-tech U.S. firms.
TAFKAP Industries has 2 million shares of stock outstanding selling at $16 per share, and an issue of $12 million in 8.0 percent annual coupon bonds with a maturity of 15 years, selling at 105 percent of par. Assume TAFKAP’s weighted average tax rate..
A three-year bond with 2.5% annual coupons yields 3%. A one-year zero coupon bond yields 2.80% and a three-year zero coupon bond yields 2.95%. Using the concept of bootstrapping, what is the two-year spot rate? Assume annual coupons for all three bon..
Calculate the expected return of portfolio.
Select all that is true about the Cash flow of the firm. While an income statement measures a company’s profits, profits are not the same as cash flows; profits are calculated on a cash basis rather than an accrual basis
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A Treasury bond that matures in 10 years has a yield of 3%. A 10-year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.7%. What is the default risk premium on the corporate bond?
Infinity Designs, an interior design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling projects. Calculate the impact of the exhibit on company profit.
A zero coupon bond with a face value of $1,000 is issued with an initial price of $565.01. The bond matures in 20 years. What is the implicit interest, in dollars, for the first year of the bond's life?
Calculate the cost-effectiveness ratio for the screening plan relative to the current plan of doing nothing.
Elite Trailer Parks has an operating profit of $246,000. Interest expense for the year was $34,000; hat was the increase in retained earnings for the year?
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