Click here to read the eBook: Business and Financial Risk BREAK-EVEN ANALYSIS A company's fixed operating costs are $640,000, its variable costs are $3.20 per unit, and the product's sales price is $4.60. What is the company's break- even point; that is, at what unit sales volume will its income equal its costs? Round your answer to the nearest whole number units UNLEVERED BETA Hartman Motors has $20 million in assets, which were financed with $12 million of debt and $8 million in equity. Hartman's beta is currently 1.2, and its tax rate is 30%. Use the Hamada equation to find Hartman's unlevered beta, bu. Do not round Intermediate calculations. Round your answer to two decimal places. bu = FINANCIAL LEVERAGE EFFECTS Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $25 million in invested capital, has $3.75 million of EBIT, and is in the 40% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 55% and pays 11% interest on its debt, whereas LL has a 20% debt-to-capital ratio and pays only 9% interest on its debt. Neither firm uses preferred stock in its capital structure. a. Calculate the return on invested capital (ROIC) for each firm. Round your answers to two decimal places. ROIC for firm LL is ROIC for firm HL is b. Calculate the rate of return on equity (ROE) for each firm. Round your answers to two decimal places ROE for firm LL IS ROE for firm HL is c. Observing that HL has a higher ROE, LL's treasurer is thinking of raising the debt-to-capital ratio from 20% to 60% even though that would increase Ll's interest rate on all debt to 15%. Calculate the new ROE for LL. Round your answer to two decimal places. The Warren Watch Company sells watches for $25, fixed costs are $140,000, and variable costs are $11 per watch. a. What is the firm's gain or loss at sales of 9,000 watches? Enter loss (if any) as negative value. Round your answer to the nearest cent. What is the firm's gain or loss at sales of 18,000 watches? Enter loss (if any) as negative value. Round your answer to the nearest cent. b. What is the break-even point (unit sales)? Round your answer to the nearest whole number units c. What would happen to the break-even point if the selling price was raised to $317 -Select- d. What would happen to the break-even point if the selling price was raised to $31 but variable costs rose to $22 a unit? Round your answer to the nearest whole number. -Select- FINANCIAL LEVERAGE EFFECTS The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $16 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $6 million with a 0.2 probability, $3.3 million with a 0.5 probability, and $0.6 million with a 0.3 probability Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round Intermediate calculations. Round your answers to two decimal places at the end of the calculations. Debt/Capital ratio is 0. ROE = CV - Debt/Capital ratio is 10%, interest rate is 9%. RE - O CV- Debt/Capital ratio is 50%, interest rate is 11%. ROE = 1 CV- Debt/Capital ratio is 60%, interest rate is 14%. RE - CV