##### What is the total combined leverage?

 Business & Finance Tutor: None Selected Time limit: 1 Day

Haunted Forest, Inc.is selling fog machines.

Use the following information about Haunted Forest, Inc. to answer the following questions.

Average selling price per unit \$325.

Variable cost per unit \$187

Units sold 369

Fixed costs \$15,287

Interest expense \$4,183

Based on the data above, what will be the resulting percentage change in earnings per share if they expect units produced and sold to change -2.9 percent?

Round the answer to two decimals

Oct 3rd, 2015

EPS = earning per share = net income/number of shares

net income = revenues - expenses = number of units*selling price -{number of units*variable cost+fixed costs +interest expense}

=369*325-{369*187+15287+4183}= \$ 31452

So EPS =  31452/number of shares

next year number of units is expected to decrease by 2.9%. Thus , new number of units will be

369*(100%-2.9%)=369*(97.1%)=358 (rounded to closest integer)

Expected Net Income  = 358*325-{358*187+15287+4183}= \$ 29934

Expected EPS= 29934/number of shares

Since number of share is assumed to  be the same (not always true in real life) the decrease in EPS is simply {(31452-29934)/31452  }* 100% = 4.8%

Oct 3rd, 2015

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Oct 3rd, 2015
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Oct 3rd, 2015
Dec 10th, 2016
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