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problem: Camping USA Inc. has only been operating for two years in the outskirts of Albuquerque, New Mexico, and is a new manufacturer of a top-of-line camping tent. You are starting an internship as assistant to the chief financial officer of the company, & the owner & CEO, Tom Charles, he decided that this is the right time to know more about the business & financial risks his company must deal with. For this, the CEO has asked you to create an analysis to support him in new meeting with Tom Charles a week from today.

To make the required computations, you have put together the following data regarding the co-structure of the company:

Output level

120,000 units

Operating assets

$6,000,000

Operating asset turnover

12 times

Return on operating assets

48%

Degree of operating leverage

10 times

Interest expense

%720,000

Tax rate

42%

The CEO has instructed you to first estimate the break even points in units of output for the company. He requires that you prepare supporting documents, which demonstrate how you arrive at your conclusion & can facilitates his review of your work. Accordingly, you are required to have the information needed to prepare an analytical income statement for the company to be presented to the CEO. In a format that is acceptable for a meeting discussion with the CEO, you also need to prepare answers to the following problems:

[A] Determine the firm's break-even point in sales dollars?

[B] If sales should increase by 40%, by what percentage would EBT [earnings before taxes] & net income increase?

[C] Create another income statement, this time to confirm the calculations from part d.

Your firm needs to increase 10 million dollars. Suppose that flotation costs are expected to be 15 dollar per share, & that the market price of the stock is $120, how many shares would have to be issued? determine the dollar size of the issue?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M918531

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