GCU Chapters 13 &16 Short Term and Long Term Financial Decisions Paper

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pneiny

Business Finance

Grand Canyon University

Description

Complete the following problems from Chapters 13-16 in Principles of Managerial Finance: Long-Term and Short-Term Financial Decisions: P13-7; P13-12; P14-9; P15-3; P15-5; P16-20

Use the Chapters 13-16 Excel resource (if needed) to complete the problem-set assignment in this topic.

Please show all work for each problem.

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Explanation & Answer

Hi there!Attached please find the completed solutions to all problems.Because you couldn't gain access to the text, I rented the textbook from Amazon:https://www.amazon.com/Principles-Managerial-Finan...So that is where I took the questions. Let me know if we need to adjust or revise anything.Thanks again,Selenica

Sales
VC
Rental
a)

b)

8 per unit
6 per unit
4000 fixed
𝐵𝑟𝑒𝑎𝑘 𝐸𝑣𝑒𝑛 𝑃𝑜𝑖𝑛𝑡 𝑢𝑛𝑖𝑡𝑠 =

𝐹𝑖𝑥𝑒𝑑
4000
=
= 2,000 𝑢𝑛𝑖𝑡𝑠
𝑆𝑎𝑙𝑒𝑠 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 8 − 6

EBIT Calculation:
Sales
Less: VC (6 * 1500)
Contribution Margin
Less: Fixed Cost
EBIT

10000
9000
1000
4000
-3000

c)

If price rises to:
Sales (10 * 1500)
Less: VC (6 * 1500)
Contribution Margin
Less: Fixed Cost
EBIT

10
15000
9000
6000
4000
2000

d)

To achieve an EBIT of 4000:
𝐸𝐵𝐼𝑇 + 𝐹𝑖𝑥𝑒𝑑
4000 + 4000 8000
=
=
= 4000 𝑢𝑛𝑖𝑡𝑠 𝑡𝑜 𝑝𝑟𝑜𝑑𝑢𝑐𝑒
𝑃𝑟𝑖𝑐𝑒 𝑢𝑛𝑖𝑡 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡 (𝑢𝑛𝑖𝑡)
8−6
2

e)

4000
= 2000
8−6
𝑆𝑎𝑙𝑒𝑠 = 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 + 𝐹𝑖𝑥𝑒𝑑
2000𝑥 = 6 ∗ 2000 + 4000
2000𝑥 = 12000 + 4000
2000𝑥 = 16000
𝑥 = $8
𝐵𝐸𝑃 𝑢𝑛𝑖𝑡𝑠 =

Sales:
Units:

16000
2000

𝑝𝑟𝑜𝑑𝑢𝑐𝑒

a)

Earnings per share represents the total amount of income generated by the company that is available to the comm
The formula for EPS is:
𝐸𝑃𝑆 =

b)

𝐸𝐵𝐼𝑇 − 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 1 − 𝑇𝑎𝑥 𝑅𝑎𝑡𝑒 − 𝑃𝑟𝑒𝑓𝑒...

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