where are the asnwers?

Explain the primary reasons for the change in earnings per share between Figure 2 and Figure 4.

To determine the extent the company is more leveraged than it was prior to changes suggested by Mike Anton, compute degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of combined leverage (DCL) both for Figure 2 (before changes) and Figure 4 (after changes). Use equations 54, 56, and 510 from the text.

Using the same financial statements (Figure 2 and Figure 4), compute the breakeven point before and after the changes. Use equation 52 from the text.

Assume you use a different measure of break-even analysis. The answer to question 4 tells you the number of units the firm needs to sell to cover fixed costs. Assume you are interested in covering all cash outflows and, furthermore, will use only cash flow numbers rather than accounting numbers. The cash outflows to be covered are (Fixed costs amortization) plus interest payments.

The formula for the revised break-even (BE) point is:

Revised BE = Fixed costs - amortization + InterestPrice P - VC variable cost per unit

Apply this formula to Figure 2 to get the revised break-even point before the changes and Figure 4 to get the revised break-even point after the changes. (Note the value for amortization can be found as a footnote at the bottom of the two figures).

Harry Engle suggests that the company could be in trouble if Mike Antons changes are put in place (as reflected in Figure 4) and sales volume is only 300,000 units. Using your revised break-even answers from question 5, do you agree?

Finally, assume sales volume reaches 1,500,000 units after Mike Antons changes are put into place. What will the new figure be for earnings per share? Under the old plan, earnings per share at 1,500,000 units would be $1.72.

Explain the primary reasons for the change in earnings per share between Figure 2 and Figure 4.

To determine the extent the company is more leveraged than it was prior to changes suggested by Mike Anton, compute degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of combined leverage (DCL) both for Figure 2 (before changes) and Figure 4 (after changes). Use equations 54, 56, and 510 from the text.

Using the same financial statements (Figure 2 and Figure 4), compute the breakeven point before and after the changes. Use equation 52 from the text.

Assume you use a different measure of break-even analysis. The answer to question 4 tells you the number of units the firm needs to sell to cover fixed costs. Assume you are interested in covering all cash outflows and, furthermore, will use only cash flow numbers rather than accounting numbers. The cash outflows to be covered are (Fixed costs amortization) plus interest payments.

The formula for the revised break-even (BE) point is:

Revised BE = Fixed costs - amortization + InterestPrice P - VC variable cost per unit

Apply this formula to Figure 2 to get the revised break-even point before the changes and Figure 4 to get the revised break-even point after the changes. (Note the value for amortization can be found as a footnote at the bottom of the two figures).

Harry Engle suggests that the company could be in trouble if Mike Antons changes are put in place (as reflected in Figure 4) and sales volume is only 300,000 units. Using your revised break-even answers from question 5, do you agree?

Finally, assume sales volume reaches 1,500,000 units after Mike Antons changes are put into place. What will the new figure be for earnings per share? Under the old plan, earnings per share at 1,500,000 units would be $1.72.

After computing all the numbers in the case, are you inclined to agree with Mike Anton that the changes to automation would be a good idea or Harry Engle, the chief financial officer, that they would not be? What is likely to be the key variable in determining the success or failure of the new plan?