Question
I already did parts A and B I need C-F done Shiyas Shirts, Inc.s assets comprise $13,000,000 in clothing, $1,000,000 in fixed assets such as
I already did parts A and B I need C-F done
Shiyas Shirts, Inc.s assets comprise $13,000,000 in clothing, $1,000,000 in fixed assets such as furniture, displays, etc. and $400,000 in a bank account (which pays 0 interest). It has no debt.
Shiya purchases one million shirts for $24 each and sells them for $33. Labor costs add up to $6 per short. It pays $1,200,000 in rent and other fixed costs.
The IRS imposes a 20% tax on profits.
Answer:
Pays $30,000,000 For shirts including Labor
$33000000 in revenue
-------
$3 Million in Pre Tax Profits
$600,000 in taxes
$3000000 in profit
----
$2,400,000 in post tax profits
Net profit=
$33,000,000 in revenue
$30,000,000 For shirts including Labor
$1,200,000 in Rent and other labor
----
Net Profit = $1,800,000
ROE= without knowing the amount of equity invested I cannot find this
b. If sales increase by 10%, what are the percentage changes in taxes and after-tax profits?
answer:
New Rev Price = 36300000
New Pre tax Profit = 6,300,000
New taxes = 1,260,000
Percent Change in taxes= 110% increase
Percent Change in After Tax Profits= 62.5% increase
c. Suppose a severe macro-economic downturn causes sales to decline to 375,000. What are taxes, profits and ROE?
d. What if sales drop to 225,000? How does this differ from c)?
e. Keep sales at one million. But Shiya must now pay $26 per shirt and labor costs increase by $2 as well. How is this loss-making situation qualitatively different from those above?
f. Assume the situation as in part a) of the previous question, with the following difference: eleven thousand of the shirts were sold to customers who will pay in one year. As in the previous homework, you distributed all the profits. What is your net change in cash for the year? What does your new balance sheet look like at the end of the year?
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