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Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm's fixed costs, F, are $2 million; 50 earth stations are produced and sold each year; profits total $500,000; and the firm's assets (all equity financed) are $5 million. The firm estimates that it can change its production process, adding $4 million to investment and $500,000 to fixed operating costs. This change will (1) reduce variable costs per unit by $10,000 and (2) increase output by 20 units, but (3) the sales price on all units will have to be lowered to $95,000 to permit sales of the additional output. The firm has tax loss carry-forwards that cause its tax rate to be zero, its cost of equity is 15 percent, and it uses no debt.
a. Should the firm make the change?
b. Would the firm's operating leverage increase or decrease if it made the change? What about its breakeven point?
c. Would the new situation expose the firm to more or less business risk than the old one?
1. The industry average inventory turnover ratio is 7 and your company's is 15. This could be good or bad news. Explain each possibility. How would you find out whether it is bad news?
Classification of preferred stock and common stock and check whether the characteristic listed below describes common stock (CS) or preferred stock (PS).
a proposed new investment has projected sales of 831000. variable costs are 56 percent of sales and fixed costs are
assume interest rate of 6. a company receives cash flows of 104875 at the end of years 4 5 6 7 and 8 and cash flows of
Discuss the recent privacy issues that challenged Facebook. Will privacy restrictions limit its ability to offer personal marketing opportunities?
In an efficient equity market, where there are no mis-priced stocks, no one can make abnormal rates of return. If this is the case, how would you then justify the existence of well-paid financial analysts in all states?
An operating merger occurs when the operations of the acquiring and target firms are combined in order to achieve economics and thereby cause the performance of the merged firm to exceed that of the pre-merged firm.
Differentiate between organic matter and inorganic matter
Create a SWOT Analysis for each of the two chosen companies change plans/programs, utilizing information obtained in the diagnosis. (Strengths, Weaknesses, Opportunities, Threats.)
1. Assume that you deposit $5,000 in an account earning 6% simple interest for 3 years. Show your work. What is the accumulated interest at the end of 3rd year?___________________
A firm has a current ratio of 2.4, a quick ratio of .6, and current liabilities of $800. What is the value of the inventory account?
The dividend is expected to grow 11% a year for the next 3 years and then at 4% a year thereafter. What is the expected dividend per share for each of the next 5 years? Round your answers to two decimal places
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