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Firm A has $10,100 in assets entirely financed with equity. Firm B also has $10,100 in assets, but these assets are financed by $5,050 in

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Firm A has $10,100 in assets entirely financed with equity. Firm B also has $10,100 in assets, but these assets are financed by $5,050 in debt (with a 10 percent rate of interest) and $5,050 in equity. Both firms sell 13,000 units of output at $2.80 per unit. The variable costs of production are $1, and fixed production costs are $14,000. (To ease the calculation, assume no income tax.) a. What is the operating income (EBIT) for both firms? Round your answers to the nearest dollar Firm A: $ Firm B: $ b. What are the earnings after interest? Round your answers to the nearest dollar Firm A: $ Firm : $ c. If sales increase by 15 percent to 14,950 units, by what percentage will each firm's earnings after interest increase? To answer the question, determine the earnings after taxes and compute the percentage increase in these earings from the answers you derived in part 6. Round your answers to one decimal place Firm A: Firm B: 96 d. Why are the percentage changes different? The answers differ because Firm A uses -Select- while Firm Buses -Select- magnifies the percentage increase in earnings when sales expand . The successful use of -Select- Check My Work (emaining) im B: $ What are the earnings after interest? Round your answers to the nearest dollar. Firm A: $ Firm B: $ If sales increase by 15 percent to 14,950 units, by what percentage will each firm's earnings after interest increas the earnings after taxes and compute the percentage increase in these eamings from the answers you derived in g decimal place Firm A: % Firm B: % d. Why are the percentage changes different? The answers differ because Fim A use -Select- magnifies the percentage increase in e equity financing Financial leverage while Firm Buses -Select- land The success MacBook Air 80 FJ 888 FG >> %23 # 3 $ 4 A % 5 & 7 * 6 8 9 0 E 70 T Y U I 0 D F G H J c V B N M assume no income tax.) Round your answers to the nearest dollar. answers to the nearest dollar. by what percentage will each firm's earnings after interest increase? To answer the question, determine centage increase in these eamings from the answers you derived in part b. Round your answers to one The successful use of -Select- . -Select- while Firm Buse Sele rings wien sales expand equity financing Tinancial leverage Checks Work maining) MacBook Air 18 > FE FO 1 0 912 A * 6 & 7 8 8 9 0 Il + delete Y Y U o O { ( } 1 H J L ? assets, but these assets are financed by $5,050 in debt (with a 10 et $2.80 per unit. The variable costs of production are $1, and fixed earest dollar A-Z firm's earnings after interest increase? To answer the question, determine ngs from the answers you derived in part b. Round your answers to one OM Buses The successful use o Seler equity financing financial leverage Check Sty Work (2 remain ok Air > 3 F# G TO FEE F ** ) 0 Il + 8 9 delete O { [ } ) enter return

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