1.Last year Baker-Huggy Inc. had fixed costs of $200,000 and net operating income of $33,000. If sales increase by 20

percent, by how much will the firm's NOI increase? What would happen to the firm's NOI if sales decreased by 21 percent?

If sales increase by 20%, the change in the firm's NOI will be ___ an increase a decrease of __%.

2. Brackets, Inc. currently anticipates that if they had a 8 percent increase in sales, net operating profits would increase by 60 percent. If Brackets' NOI is $14.7 million, what level of fixed costs do they have? The company's level of fixed costs is $__million.

3.Hurricane Katrina brought unprecedented destruction to New Orleans and the Mississippi Gulf Coast in 2005. Notably, the burgeoning casino gambling industry along the Mississippi coast was virtually wiped out overnight. CGC Corporation owns one of the oldest casinos in the Biloxi, Missouri, area, and its casino was damaged but not destroyed by the tidal surge from the storm. However, since the competitor casinos were completely destroyed and will have to be rebuilt from scratch, CGC is considering the possibility of engaging in a major renovation of the casino to transform it from a second-tier operation into one of the top gambling operations in the area. Alternatively, CGC's owners are considering a relatively modest renovation of the property and building a newer casino in Gulf Shores, Alabama, which was also devastated by the storm. Of course, CGC could just shut down the operations of the casino and move to another area of the country that allows casinos but which is less prone to hurricane damage. Identify the real options inherent in the situation faced by CGC.

The options presented to CGC are the following:(Select all that apply.)

A.Undertake a major renovation of the casino to transform it from a second-tier operation into one of the top gambling operations in the area.

B.Do nothing.

C.Shut down the operations of the casino and move to another area of the country that allows casinos but which is less prone to hurricane damage.

D.Shut down the operations of the casino entirely.

E.Invest in a newer casino in Gulf Shores, AL.

F. Engage in a relatively modest renovation of the property.