please answer, with fomulas for the excel
Schweser Satellites inc. produces satellite earth stations that sell for $95,000 each. The firm's fixed costs, F, are $1.5 million, 50 earth stations are produced and sold each year, profits total $600,000; and the firm's assets (all equily financed) are $6 million. The firm estimates that it can change its production process, adding $3.5 million to investment and $600,000 to fixed operating costs. This change will ( 1 ) reduce variable costs per unit by $9,000 and (2) increase output by 19 units, but (3) the sales price on all units will have to be lowered to $90,000 to permit sales of the additional output. The firm has tax loss carry forwards that render its tax rate zero, its cost of equity is 12%, and it uses no debt. The data has been collected in the Microsoft Excel Online fle below. Open the spreadsheet and perform the required analysis to answer the questions below. x Open spresdsheet a. What is the incremental profit? $ To get a rough idea of the project's profitoblity, whot is the project's expected rate of retum for the next year (defined as the incremental profit divided by the investment)? Do not round intermediate calculations. Round your answer to two decimal places. \% Should the firm make the investment? b. Would the firm's break-even point increase or decrease if it made the change? c. Would the new situation expose the firm to more or less business risk than the oid one? Break-Even Point Original price per unit Fixed costs Number of units produced and sold annually Total annual profits Firm's total assets % of assets equity financed Change in production process: Additional investment Additional fixed costs Reduction in variable cost per unit Increase in units of output Price to sell all units Tax rate Cost of equity % of debt used $95,000 $1,500,000 50 $600,000 $6,000,000 100% $3,500,000 $600,000 $9,000 19 $90,000 0% 12.00% 0% Calculate incremental profit: Step 1: Determine current variable cost per unit, v Step 2: Determine new profit level if production process changed Step 3: Calculate incremental profit Approximate rate of retum on new investment Should the firm make the investment? Formulas Calculale break-even point: Original break-even point, QAEO New break-even point, Qiee New. What happens to the break-even point? IN/A Delermination of more/ess exposure to business risk: Does the break-even point increase? Percentage of Fixed Costs to Total Costs: Original production process New production process Does the percentage of fxed costs increase? Do your responses suggest that the new production process is more risky
