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A regional soft drink manufacturer is considering opening a new manufacturing plant in the Midwest. Its total fixed costs are $100 million, with the cost of the new plant included in that figure at a depreciated value based on the expected life of the facility. It plans to sell soft drinks through its distributors to its existing retail accounts. A review of consumer advertising shows that $13.99 is a common price for a 24-pack of 12-oz cans of soda at the local big box stores. Retailer margins in the industry are estimated to be approximately 30% based on the retail selling price. The manufacturing variable costs of the soda are estimated to be $0.28 per can. [a] Calculate the breakeven volume. [b]What would happen to the break-even point if the fixed costs could be reduced by 35% annually? [c] What would happen if the variable costs decreased to $0.24 based on declines in commodity costs? [d] Finally, what would the break-even be if the firm wanted to make a $20 million profit? [e] Comment on the managerial significance of these numbers, based on your understanding of the break-even concept.
Allen Lumber Company had EACS (earnings available to common shareholders) of $580,000 in the year 2010 with 400,000 common shares outstanding. On January 1, 2011, the firm issued 35,000 new shares.
The annual returns on AAA stocks are normally distributed with an average historical return of 17.3% and a standard deviation of 33.4%. What is the probability that annual return on small-company stocks is between 10% and 30%?
We've just spent time talking in the course about both technical and fundamental investing. Which makes more sense to you and why? There is no correct answer ... plenty of very smart and successful people are on both sides of the argument.
What is the importance for an individual of understanding time value of money concepts? For a corporate manager? Under what circumstance would the time value of money be irrelevant?
Explain the difference, if any, between the effective interest rate of a loan and the stated interest rate. How do lenders safeguard against loans secured by accounts receivable? What are some of the common methods for banks to increase their return ..
Find the solution using the mathematical equivalence formulae (such as F=P(1+i)n ), substitute and solve (with your calculator – not with the tables) for the final answer. Solve by using the proper equivalence expressions (such as F = P(F/P, i, n)) a..
A company has a $20 million portfolio with a beta of 1.2. It would like to use future contracts on a stock index to hedge its risk. The index future price is currently standing at 1080, and each contract is for delivery of $250 times the index. What ..
For the next 12 years, you decide to place $3661 in equal year-end deposits into a savings account earning 6.72 percent per year. How much money will be in the account at the end of that time period?
You can buy property today for $2.1 million and sell it in 6 years for $3.1 million. (You earn no rental income on the property.) If the interest rate is 11%, what is the present value of the sales price?
Consider a 30-year, $140,000 mortgage with a rate of .0620 percent. Thirteen years into the mortgage, rates have fallen to 5 percent. What would be the monthly saving to a homeowner from refinancing the outstanding mortgage balance at the lower rate ..
The following transactions pertain to 2012, the first-year operations of Hall Company. All inventories was started and completed during 2012. Assume that all transactions are cash transactions. 1. Acquired $4,900 cash by issuing common stock.
Consider the CAPM. The expected return on the market is 13%. The expected return on a stock with a beta of 1.5 is 18%. What is the risk-free rate?
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