Two firms, A and B, both produce brushes. The price of brushes is $2.20 each. Firm A has total fixed costs of $470,000 and variable costs of 48 cents per brush. Firm B has total fixed costs of $260,000 and variable costs of 72 cents per brush. The corporate tax rate is 35%. If the economy is strong, each firm will sell 1,511,000 brushes. If the economy enters a recession, each firm will sell 980,000 brushes.

If the economy is strong, what will be the after-tax profit of Firm A?

10- Your business plan for your proposed start-up firm envisions first-year revenues of $120,000, fixed costs of $30,000, and variable costs equal to one-third of revenue.

a.What are expected profits based on these expectations?

b.What is the degree of operating leverage based on the estimate of fixed costs and expected profits?(Round your answer to 2 decimal places.)

c.If sales are 10% below expectation, what will be the percentage decrease in profits?

e.Based on the DOL, what is the largest percentage shortfall in sales relative to original expectations that the firm can sustain before profits turn negative?(Round your answer to 1 decimal place.)

f.What are break-even sales at this point?