Make sure all answers are clear, complete. 3. Show ALL steps, formulae, calculations for problems. 4. ALL work MUST be your own. You may consult any of the course materials.For any calculations in Excel, please cut and paste the relevant part of the spreadsheet into the Word document that you turn in. Do not forget to list all the algebraic formulae, steps and calculations used, even if you do them in Excel.
Always keep a backup copy of your work. Good luck!
A firm has $20,000 in net income, and NOI of $100,000. Its tax rate is 25 percent, SGA is $50,000, and R&D expense is $19,000. Its COGS is $200,000. Solve for the interest expense needed for this firm to have sales of $600,000. Your final answer should list the income statement from Sales to Net Income with all numbers and sub-totals filled in.
Note: You MUST do this problem in Excel and then cut and paste the solution into the Word document you turn in. Do NOT just give me numbers, but make sure you list (in words) all the equations used, and how they were used in the calculations. Also, please correctly label all variables.
2.)A firm is planning to switch from LIFO to FIFO during a period of falling prices.
(a) Explain clearly and completely whether this switch would cause the firm’s return on equity and inventory turnover ratios to either increase, decrease, or stay the same. Please do the analysis separately for each ratio and use the words “exceptionally key” in your answer.. Use the words “exceptionally well” in your answer.
(b) Next, explain how these ratios would be impacted if the firm simultaneously switches from straight-line to accelerated depreciation immediately after buying some expensive new equipment.
3.)A firm sells its product for $93 per unit. It has a variable cost of $25 per unit, fixed operating costs of $170,000 and borrowed $5 million long-term at 6 percent per year. (a) Calculate the breakeven point in units and profit at the breakeven point. (b) What will the profit or loss be if the firm sells 5650 units? (c) Calculate the DOL, DCL, DFL. (d) Without doing any calculations, explain how the DOL, DCL, DFL would be impacted if the firm pays off $1.25 million of the debt and why these impacts matter.
4.)Would you expect to have a higher NPV for (a) cash flows of -$200 now, $50 in years 1, 2, 3, and $120 in year 5 OR (b) cash flows of -$200 now, $50 in years 1,2, and $170 in year 5? Explain your reasoning in detail and in clear, simple, English without doing any calculations.
5.) You have won a lottery and can choose to receive (a) $10 million now OR (b) $15 million in 10 years, OR (c) $5 million now and $6 million in 6 years. If you believe that you can earn 6 percent a year, which of these three options should you choose? Ignore all tax effects.
Note: You MUST do this problem in Excel and then cut and paste the solution into the Word document you turn in. Do NOT just give me numbers, but make sure you list (in words) all the equations used, and how they were used in the calculations. Also, please correctly label all variables.
