Please help calcluating the overall break-even point in sales dollars and the cash break-even point. also compute the DOL, DFL and DCL

april 1, 20XX: Dr. Nathan Swan, age 40. chairman of the board of directors, chief executive oflicer, and founder of the Chem-Med Tompany, was in his office staring at the ceiling, wondering if he would not have been better off still teaching biochemistry at the Jniversity of Toronto. This business was getting to be a headache. Only a short time ago he was able to spend most of his time in the ompany lab comfortably working with test tubes and formulas. Lately, though, it seemed that all his waking hours were spent with inancial statements and spreadsheets, and in meetings. He wanted the firm to grow and make money, but he had no idea that the financial ind of the business would be so demanding and complex. Dr. Swan was a hittle mystified by financial matters. How could one describe a company in financial terms? How could financial statements ndicate whether or not a firm was in good or bad shape? (The balance in the company chequing account didn't seem to be an indicator.) Tow could one convince a group of hard-nosed investors that the company was capable of making a lot of money in the next few years, if t just had more money now? (Dr. Swan was always puzzled by the fact that Chem-Med was growing and making money, but it never cemed to have enough cash.) Chem-Med began operations 18 years ago after Dr. Francois Swan completed the development of commercial-seale isolation of sodium yyaluronate (hereafter referred to as HA), a nuturally occurring biological flud that is useful in eye sargery and other medical and veterinary uses. The isolation process, complex and proprietary to the company, involves extracting and purifying HA from rooster combs. Initial seed money for the enterprise came from research grants from the University of Toronto and the federal government, plus contributions from Dr. Swan's colleagues and associates, who were now classified as the company's shareholders (254 as of Apri 20XX, In mid-20XU Chem-Med commenced the manufacgere and distribution of its first product, VISCAM, which is used to hold tissues in place during and after surgery of the retina. In March 20XV Chem-Med received regulatory approval to market another HA product known as VISCHY, which is used for the treatment of degenerative joint diseases in horses. The two products, VISCAM and VISCHY, are the only ones Chem-Med currently produces; however, the company has an active R \& D (Research \& Development) program investigating other applications. There are only two other manufacturers of FDA-approved HA products in the world: AB Fortia, a Swedish corporation, which manufactures a product called Healon in Sweden and distributes it in North America through a subsidiary, Pharmacia Inc., and Cilco Inc. in West Virginia. Chem-Med has about a 25 percent share of the market (for HA products in eye surgery) against Cilco's 16 percent and Pharmacia's 59 percent. Pharmacia, with the power of giant AB Fortia behind it, waged a continuing marketing war with Chem-Med, undercutting Chem-Med's prices and wooing its customers away at every opportunity. The matter came to a head in September 20XX, when Chem-Med filed a $13 million suit against Pharmacia, charging unfair trade practices. Dr. Swan was reasonably confident that Chem-Med would prevail in the suit, and in fact, Pharmacia had recently offered to settle out of court for $500,000. Dr. Swan's primary problem was that although he was convinced the company was sound and would grow, he wasn't sure how to communicate that to potential investors in the financial community in a way that would convince them. Just handing out past income There are only two other manufacturers of FDA-approved HA products in the world: AB Fortia, a Swedish corponation, which manufactures a product called Healon in Sweden and distributes it in North America through a subsidiary, Pharmacia Inc., and Cilco Inc. in West Virginia, Chem-Med has about a 25 percent share of the market (for HA products in eye surgery) against Cilco's I6 percent and Pharmacia's 59 pereent. Pharmacia, with the power of giant AB Fortia behind it, waged a continuing marketing war with Chem-Med. undercutting Chem-Med's prices and wooing its customers away at every opportunity. The matter came to a head in September 20XX. when Chem-Med filed a \$13 million suit against Pharmacia, charging unfair trade practices. Dr. Swan was reasonably confident that Chem-Med would prevail in the suit, and in fact, Pharmacia had recently offered to settle out of court for $500,000. Dr. Swan's primary problem was that although he was convinced the company was sound and would grow, he wasn't sure how to communicate that to potential investors in the financial community in a way that would convince them. Just handing out past income statements and balance sheets (shown in [T Tables 1 and 9 2) that he received from the accountants didn't seem to be enough. Further. he wasn't even sure the company needed outside financing, let alone how much, He just believed they would need it, since they had always had to ask for money in the past. 20XU20XW (in thousands) Pro Forma Income Statements Income taxes Interest expense Income before tax (101)1,2761,7162,4022,8994,333 Income taxes (40% in 20XV;33% thereafter) Net income Dividends paid Inerease in retained earnings Average number of shares** Earnings per share CHEM-MED COMPANY Balance Sheets (in thousands) 20XU20XV20XW20XX20XY20XZ Assets Cash and equivalent Accounts receivable Inventories Other current Total current assets Property, plant, \& cquipment Less: Accumulated amortization Property, plant, \& equipment net Other capital assets Fotal assets \begin{tabular}{rrrrrrrr} $124 & $103 & $167 & $205 & $422 & $101 \\ \hline 100 & 409 & 564 & 907 & 1,495 & 2,351 \\ \hline 151 & 302 & 960 & 1,102 & 1,443 & 798 \\ \hline 28 & 59 & 29 & 41 & 57 & 11 \\ \hline 403 & $73 & 1,720 & 2,255 & 3,417 & 3,261 \\ \hline 1,901 & 2,298 & 2,917 & 4,301 & $,531 & 8,923 \\ \hline 81 & 82 & 346 & 413 & 522 & 588 \\ \hline 1,820 & 2,216 & 2,571 & 3,888 & 5,009 & 8,335 \\ \hline 0 & 101 & 200 & 200 & 215 & 399 \\ \hline$2,223 & $3,190 & $4,491 & $6,343 & $8,641 & $11,995 \\ \hline \end{tabular} Dr. Swan had lunch with his banker recently, and the banker mentioned several restrictive covenants the company would have to meet came to the bank for financing. The three covenants were came to the bank for financing. The three covenants were - The current ratio must be maintained above 2.25 to 1 . - The debt-to-assets ratio must be less than 0.3 to 1 . - Dividends cannot be paid unless earnings are positive. Dr. Swan didn't think he would have any trouble with those, but he wasn't sure. He would have to analyze the numbers before the next board of directors meeting, but he now had to meet with a representative of a supermarket chain. As an investor considering the addition of Chem-Med to your portfolio, you are interested in the company's record of profitability, prospects for the future, degree of risk, and how it compares with others in the industry (shown in G Table 3). From that point of view. answer the following questions: WHERE IT SAYS RYAN BOOT COMPANY, ASSUME IT SAYS CHEM-MED COMPANY, YOU ARE TO USE THE SAME DEOIUPEMENTS AS FOR THE RYAN BOOT COMPANY IN THE CASE b. In your analysis, calculate the overall break-even point in sales dollars and the cash break-even point. Also compute the DOL, DFI and DCL. c. Use the information in parts a and b to discuss the risk associated with this company. Given the risk, decide whether a bank shoul