a)BouncyBungeeRubberBandCompanyhasfixedcostsof$2,760,000peryear,itsellsitsrubberbandsfor$3.75per pack,andthevariablecostofthesepacksis$0.75.

Theyestimatetheywillsell1,000,000packsthisyear,witha standarddeviation

of40,000units.Findtheprobabilityofthecompanyincurringaloss.

b)Whatisthebreakevenpoint,indollars,forZippyDippySwimwear,makerofbathingsuitsand

accessories?Ithasthe followingcosts:

Rawmaterials: $25perbathingsuit

$8pertowel

$16perbeachumbrella

$37perswimsuitcover-up

Laborcosts:$18averagepersuit

$10perumbrella

$3pertowel

$20percover-up

Commissions: $12peritem

Utilities: $150,000

Rent: $196,000

Taxes: $230,000

Salaries: $550,000

Thepriceofeachsuitis$85.

Thepriceofeachtowelis$25.

Thepriceofeachumbrellais$40.

Thepriceofeachcover-upis$81.

c)TheAlbanyCorporationhasapresentcapitalstructureconsistingofcommonstock

($200million,10millionshares) anddebt($150million,8%).

Thecompanyisplanningamajorexpansionandisundecidedbetweentwofinancing plans.

PlanA: Equityfinancing.Underthisplan,anadditional2.5millionsharesofcommonstockwill besoldat$15each. PlanB: Debtfinancing.Underthisplan,$37.5millionof10%long-termdebtwillbesold.

WhatistheEBIT-EPSindifferencepoint?Assumea40percentmarginaltaxrate.