Question

In: Finance

The Branding Iron Company sells its irons for $30 apiece wholesale. Production cost is $20 per...

The Branding Iron Company sells its irons for $30 apiece wholesale. Production cost is $20 per iron. There is a 35% chance that a prospective customer will go bankrupt within the next half-year. The customer orders 1,000 irons and asks for 6 months’ credit. Assume the discount rate is 7% per year, there is no chance of a repeat order, and the customer will either pay in full or not pay at all.

a. Calculate the expected profit for the order. (A negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Expected Profit?

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

The Branding Iron Company sells its irons for $80 apiece wholesale. Production cost is $70 per...
The Branding Iron Company sells its irons for $80 apiece wholesale. Production cost is $70 per iron. There is a 35% chance that a prospective customer will go bankrupt within the next half-year. The customer orders 1,000 irons and asks for 6 months' credit. Assume the discount rate is 8% per year, there is no chance of a repeat order, and the customer will either pay in full or not pay at all. Calculate the expected profit for the order....
The Branding Iron Company sells its irons for $60 apiece wholesale. Production cost is $50 per...
The Branding Iron Company sells its irons for $60 apiece wholesale. Production cost is $50 per iron. There is a 25% chance that a prospective customer will go bankrupt within the next half-year. The customer orders 1,000 irons and asks for 6 months’ credit. Assume the discount rate is 8% per year, there is no chance of a repeat order, and the customer will either pay in full or not pay at all. a. Calculate the expected profit for the...
Ch 30 Q1. The Branding Iron Company sells its irons for $56 apiece wholesale. Production cost...
Ch 30 Q1. The Branding Iron Company sells its irons for $56 apiece wholesale. Production cost is $46 per iron. There is a 31% chance that wholesaler Q will go bankrupt within the next year. Q orders 1,000 irons and asks for seven months’ credit. Assume that the discount rate is 11% per year, there is no chance of a repeat order, and Q will pay either in full or not at all. a. Calculate the NPV of the order....
A company sells clocks for $20 each. Its variable cost per unit is $14, and its...
A company sells clocks for $20 each. Its variable cost per unit is $14, and its fixed cost per year is $9,000. 1. If it sells 2,000 clocks this year, what is its contribution margin? 2. If it sells 2,000 clocks this year, what is its operating income? 3. If it sells 2,000 clocks this year, what is its operating leverage? 4. If it sells 2,000 clocks this year, what would be the percentage change in its operating income if...
A company sells clocks for $20 each. Its variable cost per unit is $14, and its...
A company sells clocks for $20 each. Its variable cost per unit is $14, and its fixed cost per year is $9,000. 1. If it sells 2,000 clocks this year, what is its contribution margin? 2. If it sells 2,000 clocks this year, what is its operating income? 3. If it sells 2,000 clocks this year, what is its operating leverage? 4. If it sells 2,000 clocks this year, what would be the percentage change in its operating income if...
4.   Suppose that affiliate A produces 150,000 handbags for $20 apiece and sells them to affiliate...
4.   Suppose that affiliate A produces 150,000 handbags for $20 apiece and sells them to affiliate B. Affiliate B, in turn, sells these handbags for $50 apiece to an unrelated customer. The tax rate in A’s country is 30% and B’s country is 40%. A’s costs are $3,000,000 and a typical manufacturer mark-up is 50%. B’s selling price is $7,500,000 to unrelated customers, B’s incremental costs are $2,000,000. Typical distributor fees are 20% times their local costs. Independent parties sell...
Consider a market with 30 sellers and 30 buyers. Of 30 sellers, there are 10 ”high-cost” sellers with production costs of $25 per unit and 20 ”low-cost” sellers with costs of $5 per unit.
Consider a market with 30 sellers and 30 buyers. Of 30 sellers, there are 10 ”high-cost” sellers with production costs of $25 per unit and 20 ”low-cost” sellers with costs of $5 per unit. Of 30 buyers, there are 15 ”high-value” buyers with values of $30 per unit and 15 ”low-value” buyers with values of $10 per unit.a.) Identify the demand schedule for this market.b.) Identify the supply schedule for this market.c.) Graph the demand and supply schedules for this...
The H & S Motor Company produces small motors at a production cost of $30 per...
The H & S Motor Company produces small motors at a production cost of $30 per unit. Defective motors can be reworked at a cost of $12 each. The company produces 100 motors per day and averages 88 percent good quality motors. Based on past experience, 50% of the defective motors can be reworked prior to shipping to customers. These are also considered good motors. A good motor can be sold for $100 while a defective motor can be scrapped...
A company sells clocks for $40 each. Its variable cost per unit is $32, and its...
A company sells clocks for $40 each. Its variable cost per unit is $32, and its fixed cost per year is $20,000. 1. If it sells 12,500 clocks this year, what is its contribution margin? 2. If it sells 12,500 clocks this year, what is its operating income? 3. If it sells 12,500 clocks this year, what is its operating leverage? 4. If it sells 12,500 clocks this year, what would be the percentage change in its operating income if...
Company XYZ manufactures a tangible product and sells the product at wholesale. In its first year...
Company XYZ manufactures a tangible product and sells the product at wholesale. In its first year of operations, XYZ manufactured 1,400 units of product and incurred $224,000 direct material cost and $108,500 direct labor costs. For financial statement purposes, XYZ capitalized $63,500 indirect costs to inventory. For tax purposes, it had to capitalize $94,500 indirect costs to inventory under the UNICAP rules. At the end of its first year, XYZ held 280 units in inventory. In its second year of...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT