Answer the following questions with the steps.

a.You are starting a cat food company.You forecast that you can sell 15000 bags of cat food in your first year, and your manufacturing cost will be $3.50/bag.You overhead (fixed cost) for advertising ,rent and salaries are $300,000.What is the minimum price you have to charge per bag of cat food to break even?

ans: a.16.50 b.90.00 c.6.83 d.23.50 e.70.00

b.You grow and sell organic coffee beans.Each sack of coffee beans costs you $5 to produce and sell for $80 to whole foods.Your fixed costs for maintaining the orchards and equipment ,property taxes ,insurance and employees are $2mm/year.You currently sell 50000 sacks of coffee beans per year.If your volume of sales increases 10% next year ,by what percentage will your EBIT increase.

ans: a. 21% b.12% c.55% d.90% e.10%

c. A company's optimal capital structure can change overtime.Which of the following should be expected to directly impact the optimal capital structure calculation.

ans: a. change in the credit rating on a company's bond.

b.all the three choices given are true

c. changes in the company's effective income tax rate

d.none of the three choices above

e.changes in the company's beta