3. (20 Points) RapidVolt, LLC. is an upstart company that designs and manufactures residential electric car chargers. The company expects its sales to reach 100,000 units that sell for $600 each. Rapid Volt shrewd management was able to keep tight control on cost through long-term and future contracts strategies, limiting the cost to produce each system to 25% of its price, and keeping GS&A at $10 million. The founders started with $10 million of equity funds and a $20 million 15% loan from a strategic investor. RapidVolts 2018 financial statements contain the following data: Shares of Common Stock Outstanding 1,000,000 shares Depreciation $3,000,000 Fed-to-State Tax Rate 40% Dividend Payout Ratio 15% a b d Prepare a detailed Income Statement showing dividends and retained earnings. Calculate all applicable profitability ratios and debt ratios, as given below. Construct Du Pont and extended Du Pont equations. What is the break-even level of sales? Calculate DOL, DFL, and DCL. Calculate the book value of the stock If investors are willing to buy the stock at 20 times its earning, what is the stock market price? e f 8 Answer a. RapidVolt, LLC. Income Statement Sales Cost of Goods sold Gross Income GS&A EBITDA Dep. EBIT Interest Expense Taxable income Taxes Net Income Dividend Retained Earnings b. Profitability and Debt Ratios 1. Profitability Gross Profit Margin = Gross Income / Sales Operating Profit Margin = EBIT/ Sales Net Profit Margin (ROS) = Net Income / Sales Basic Earning Power = EBIT / Total Assets Return on assets (ROA)= Net Income/Total Assets Return on equity (ROE) = Net Income / Equity 2. Debt Management Debt to total Asset = Total Debt / Total Assets. Debt to Equity = Total Debt / Common Equity Times interest earned = EBIT / Interest Expense Page 3 of 4 C. Du Pont and Extended Du Pont d. Breakeven Level of Sales e DOL, DFL and DCL f. Book Value g. Market Price