What are the earnings after interest

Assignment Help Accounting Basics
Reference no: EM13768347

Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 in equity. Both firms sell 10,000 units of output at $2.50 per unit. The variable costs of production are $1, and fixed production costs are $12,000. (To ease the calculation, assume no income tax.)

a. What is the operating income (EBIT) for both firms?

b. What are the earnings after interest?

c. If sales increase by 10 percent to 11,000 units, by what percentage will each firm's earnings after interest increase? To answer the question, determine the earnings after taxes and compute the percentage increase in these earnings from the answers you derived in part b.

Reference no: EM13768347

Questions Cloud

What is the purpose or rationale of the law : What is the purpose or rationale of the law? How will the law affect day-to-day operations within human service organizations? What are the arguments for or against the law
Write an essay on whos your hero : Write an essay on Whos Your Hero. For this essay assignment, select one person or character who is important to you as you develop and grow as a human being.
Eco-advantage in the marketplace : Using the Green-to-Gold Plays discussed in this week's reading assignment, identify one "downside" that is being managed and one "upside" (chapter 5) that is being built by the businesses portrayed in this video. . Explain why you believe that thi..
An individual''s ability to successfully negotiate challenges : Explore how policies and legislation could impact the family or individual during each life cycle.
What are the earnings after interest : What is the operating income (EBIT) for both firms? What are the earnings after interest?
Eco-plays framework : Imagine that the company that is the focus of your AUDIO analysis in Week 1 can make one strategic move (a "green-to-gold play") in the immediate future to build an eco-advantage. Prepare a two to three page paper , that discusses the following:
Impacts of an energy resource plan : Describe the sustainability plan you developed in Episode 4 of Gamescape. Identify two strengths and two weaknesses in this plan. How can you address these weaknesses?
In which class was his relative position higher : A student scored 76 on a general science test where the mean and standard deviation were 82 and 8, respectively he also scored 53 on a psychology test where the class mean and standard deviation were 58 and 3, respectively. In which class was his rel..
Legal and ethical considerations in marketing : Legal and Ethical Considerations in Marketing, Product Safety, and Intellectual Property, Research three to five (3-5) ethical issues relating to marketing and advertising, intellectual property, and regulation of product safety and examine whether..

Reviews

Write a Review

Accounting Basics Questions & Answers

  Prepare journal entries of sigfried company

Sigfried Company borrows $60,000 on July 1 from the bank by signing a $60,000, 10%, one-year note payable. Prepare the journal entry to record the proceeds of the note.

  Tally amp co incurred a pretax operating loss of 100000 in

tally amp co. incurred a pretax operating loss of 100000 in its first year of operations for both financial reporting

  Determine the profit per pound from processing the t-bone

prepared from a situation suggested by professor john w. hardy. abilene meat processing corporation is a major

  What is the net income for this firm

Papa Roach Exterminators, Inc., has sales of $432,000, costs of $210,000, depreciation expense of $25,000, interest expense of $8,000, and a tax rate of 35 percent. What is the net income for this firm?

  Determine activity-based costing and traditional costing

How would you describe activity based costing? Also, can you explain why it might result in more accurate product costing information than the product cost derived under the traditional costing approach?

  Considering the cash flow impact of the equipment as well

xyz company has the option to purchase additional equipment that will cost about 42000 and this new equipment will

  How might the nature of the business affect your decision

Imagine you are preparing a business's cash budget, which involves determining the amount of cash to keep on hand. How might the nature of the business affect your decision? Provide specific examples in your response.

  Prepare the t-account analysis

You are only required to enter the events as described in 2012; do not attempt to combine all 12 events into a single financial statement. Note that answers may require more or less than four T-accounts.

  Swedish navy company manufactures wristwatches on an

swedish navy company manufactures wristwatches on an assembly line. the work in process inventory as of march 1

  That old equipment for producing subassemblies is worn out

that old equipment for producing subassemblies is worn out said bruce truesdale president of truesdale company. we need

  What is the present worth of 50000 in month 1 51000 in

what is the present worth of 500.00 in month 1 510.00 in month 2 and amounts increasing by 10 per month through month

  Carter inc can make 100 units of necessary component part

carter inc can make 100 units of necessary component part with the following costs dierct materials 120 000 direct

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd