Arnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $800,000 in a start-up firm.
He is nervous, however, about future economic volatility. He asks you to analyze the following financial data for the past year's operations of the two firms he is considering and give him some business advice.
Amold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $800,000 in a start-up firm. He is nervous, however, about future economic volatility. He asks you to analyze the following financial data for the past year's operations of the two firms he is considering and give him some business advice. Required a. Use the contribution margin approoch to compute the operating leverage for each firm. b. If the economy expands in coming years, Larson and Benson will both enjoy a 10 percent per year increase in sales, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase.) c. If the economy contracts in coming years, Larson and Benson will both suffer a 10 percent decrease in sales volume, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note. Since the number of units decreases, both total revenue and total variable cost will decrease.) Complete this question by entering your answers in the tabs below. Use the contribution margin approach to compute the operating leverage for each firm. (Round your answers to 2 decimal places.) Requlred a. Use the contribution margin approach to compute the operating leverage for each fitm. b. If the economy expands in coming years, Larson and Benson will both enjoy o 10 percent per year increase in sales, assuming that. the selling price remoins unchanged. Compute the change in net income for each firm in dollor amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase) c. If the economy contracts in cohing years, Larson and Benson will both suffer a 10 percent decrease in sales volume, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentdge. (Note Since the number of units decreases, both total tevenue and total variable cost will decrease.) Complete this question by entering your answers in the tabs below. It the economy expands in coming years, Larson and Benson will both enjoy a 10 percent per year increase in saies, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase.) (Negative amount. should be indicated by a minus sign.] Required a. Use the contribution margin approach to compute the operating leveroge for each firm. b. If the economy expands in coming years, Larson and Benson will both enjoy a 10 percent per year incresse in sales, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note. Since the number of units increases, both revenue and variable cost will increase.) c. If the economy contracts in coming years, Larson and Benson will both suffer a to potcent decrease in sales volume, assuming that the selling pice remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Nore since the namber of units decreases, both total revenue and total variable cost will decrease. Complete this question by entering your answers in the tabs below. If the economy contracts in coming years, Larson and Benson will both suffer a 10 percent decrease in sales volume, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units decreases, both total revenue and total variable cost will decrease.) (Negative) amount should be inidicated by a minus sign.)
