Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Business Management Expert

Break-Even Point

Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm's fixed costs, F, are $2 million, 50 earth stations are produced and sold each year, profits total $500,000, and the firm's assets (all equity financed) are $5 million. The firm estimates that it can change its production process, adding $4 million to investment and $500,000 to fixed operating costs. This change will: (1) reduce variable costs per unit by $10,000 and (2) increase output by 20 units, but (3) the sales price on all units will have to be lowered to $95,000 to permit sales of the additional output. The firm has tax loss carryfor- wards that render its tax rate zero, its cost of equity is 16%, and it uses no debt.

a. What is the incremental profit? To get a rough idea of the project's profitability, what is the project's expected rate of return for the next year (defined as the incremental profit divided by the investment)? Should the firm make the investment? Why or why not?

b. Would the firm's break-even point increase or decrease if it made the change?

c. Would the new situation expose the firm to more or less business risk than the old one?

Business Management, Management Studies

  • Category:- Business Management
  • Reference No.:- M91951963
  • Price:- $15

Priced at Now at $15, Verified Solution

Have any Question?


Related Questions in Business Management

Nordstrom inc is a seattle-based department store rivaling

Nordstrom Inc. is a Seattle-based department store rivaling the likes of Saks Fifth Avenue, Neiman Marcus, and Bloomingdale's. Nordstrom is a Hall of Fame member of  Fortune  magazine's "100 Best Companies to Work For" l ...

Prepare a minimum of eight pages ms word document using apa

Prepare a minimum of eight pages, MS Word document using APA 6th Edition guidelines. Again, the paper must include a title page, an introduction, the body, summary and conclusion paragraph(s), and a reference page that p ...

Someone installed malware on carlos computer it records his

Someone installed malware on Carlo's computer. It records his purchases on Amazon and other sites and reports them to an agency that sends Carlo advertisements for other products. This is not a big deal. Do you agree? Ex ...

Switches are an integral part of networks they are the

Switches are an integral part of networks. They are the devices you utilize for host connectivity to the network. Please identify and discuss an attack that takes advantage of a weakness in switches.

If there is a market for leather but a new synthetic

If there is a market for leather but a new synthetic product that can replace leather in briefcases, furniture, etc. is introduced into the market but it cannot replace leather in shoes how will this affect supply and de ...

Can i get some help with thisis forward rate pricing rate

Can I Get some help with this. Is Forward Rate Pricing Rate Agreements.Useful for government contracting? Are they risky? Is it useful for planning a program?

Discuss the principle components of an effective and

Discuss the principle components of an effective and compelling vision. Then present the vision for your current/previous organization, detailing how you would improve upon that vision to ensure that it conforms to your ...

Discuss the attributes of concern in a transportation

Discuss the attributes of concern in a Transportation Logistics Management.

Assess the organizational dimensions that must be

Assess the organizational dimensions that must be considered when selecting organizational structures.

Digital books llc earns a yearly positive economic profit

Digital Books, LLC earns a yearly positive economic profit of $25,000 if it can sell 10,000 e-books. Each time, a customer buys an e-book it incurs a cost of $0.50 (cost of downloading each e-book). Digital Books, LLC sp ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As