equal its Olinde Electronics Inc. produces stereo components that sell at P_$100 per unit. Olinde's fixed costs are Q2. currently $50,000; and Olinde's assets (all equityo bi nam tred are $500,000. Olinde can change its production variable costs per unit by $10 and (2) increase output by 2,000 units , but (3) the sales price on all units woute process by adding $400,000 to assets and $50,0fput o fixed operating costs. This change would not receive have to be lowered to $95 to permit sales of the additional output. Olinde has tax loss capsy-forwards that cause its tax rate to be zero, it uses no debt, and its average cost of capital is 10 percent. a. Should Olinde make the change? b. Would Olinde's breakeven point increase or decrease if it made the change? c. Suppose Olinde were unable to raise additional equity financing and had to borrow the $400,000 at an interest rate of 10 percent to make the investment. Use the Du Pont equation to find the expected ROA of the investment. Should Olinde make the change if debt financing must be used? or is in this situation: EBIT = $4 million; tax rate = T = 35%; per unit. Olinde's fixed costs are Q2. $100 Olinde Electronics Inc. produces stereo components that sell at P $200,000; variable costs are $50 per unit; 5,000 components are produced and sold each year, EBIT is currently $50,000; and Olinde's assets (all equity financed) are $500,000. Olinde can change its production process by adding $400,000 to assets and $50,000 to fixed operating costs. This change would (1) reduce variable costs per unit by $10 and (2) increase output by 2,000 units, but (3) the sales price on all units would have to be lowered to $95 to permit sales of the additional output. Olinde has tax loss carry-forwards that cause its tax rate to be zero, it uses no debt, and its average cost of capital is 10 percent. a. Should Olinde make the change? b. Would Olinde's breakeven point increase or decrease if it made the change? c. Suppose Olinde were unable to raise additional equity financing and had to borrow the $400,000 at an interest rate of 10 percent to make the investment. Use the Du Pont equation to find the expected ROA of the investment. Should Olinde make the change if debt financing must be used? nerators, is in this situation: EBIT = $4 million; tax rate = T = 35%, 600 000; and book - 21