Question 1

The table below shows the cost and revenue information of a firm.

(a) Complete the table above. [9 marks]

(b) Determine the price and output at equilibrium. [6 marks]

(c) Calculate the profit or loss at equilibrium. [4 marks]

(d) Is this firm in the short-run or long-run? Explain your answer. [5 marks]

(e) To what type of market structure does this firm belong? Why do you say so? [6 marks]

You have the following financial statement data for a corporation: Revenue = 10,000,000

Operating income = 7,500,000 interest = 2,500,000

Net Income = 4,000,000 Current Assets = 10,000,000 Total Assets = 100,000,000 Current Liabilities = 8,000,000 Long-term Debt = 50,000,000

Total Common Equity = 42,000,000

You also have the following information: Total Dividends Paid = 1,000,000 Common shares outstanding = 2,000,000

Current share price = $27

The long-term debt consists of one bond issue that has 6 years remaining until maturity. Each bond has a par value of $1,000 and pays an annual coupon. The current yield-to-maturity on the bond issue is 8%.

The firm is considering a capital budgeting project that will require an initial outlay of $1,000,000 that is expected to produce net cash inflow of $200,000 each year for the next 7 years, at which time the project will end. The project under consideration is considered to be of equal risk as the firm's typical project. The firm has not made a decision as to how it will finance the project, if necessary. If it issues new equity to finance the project, it could sell new common equity at the current market price, while incurring total flotation cost of 5%.

The current risk-free rate of return for the market 2%, and the market risk-premium is estimated to stand at 7.5%. You know nothing about the firm's expected dividend policy, but you do know that the firm's equity Beta is 1.8

Based on the information you have, answer the following questions about the firm (You must show work for each question and answer each question separately in order to earn full credit):

1. What is the firm's profit margin?

2. Using the DuPont identity and the information given, show the value of the firm's equity multiplier?

3. What is the firm's P/E ratio?

4. What is the firm's current ratio?

5. What is the best estimate of the firm's capital structure according to book value?

6. What is the total market value of the firm's equity?

7. What is the total market value of the firm's debt?

8. What is the total value of the firm based on market value?

1. What is the firm's capital structure based on market values?

10. What is the firm's pre-tax cost of debt?

11. What is the best estimate for the firm's cost of common equity if using retained earnings as a financing option?
    50. What is the best estimate for the firm's WACC if using retained earnings as common equity financing?
    1000. What is the best estimate of the NPV for the proposed capital budgeting project, given the info that you have?
    14. Should the firm accept the project based on NPV analysis? Why or why not?

• • What is the IRR for the proposed project?

ABC company which is based in the US,sells product X and has reported a revenue of $1,925,000 and a gross income ( profit before tax) of $50,000. answer the questions below .

1. what is the cost of the revenue ?

2. what is the gross profit margin?

3. suppose the company is in the 20% tax bracket,what is the net income?

4.what is the net profit margin

5. compare the gross and net profit margins,what do they tell you? a brief answer

6.if the company sells product x for $150 per unit,in which the variable costs per unit is $90,what is the contribution margin and what is the contribution margin ratio?

7. suppose that the fixed costs in producing product x is $720,000, calculate the breakeven point( in dollars and in units)

8.plot a break-even graph highlighting the break-even point,revenue,total costs,overall variable costs and fixed costs?

note : number 1 - 4 have been answered

An online news site earns revenue by selling subscriptions at price pS and ads at price pA. For simplicity, assume the site has zero marginal cost. Consumer demand for subscriptions is given by:

Qs=1-Ps

Demand from advertisers for ad-space depends on the number of subscribers though:

Qa=Qs(1-Pa)

What price should the firm charge for subscriptions and ads, considered jointly, to maximize profits?

Please explain these 3 question on NIKE on their sensitive , revenue value quality prestige etc

• How sensitive are your customers to changes in price?
• What revenue do you need to break even and achieve profitability?

• What does the price say about your product in terms of value, quality, prestige, etc.

Suppose Dansko Integrated has the following revenue and expenses for 2018:

Revenues of $8,500,000
Cost of Goods Sold of $2,550,000
Depreciation Expenses of $800,000
Income Taxes of $1,144,000
Interest Expenses of $90,000
Other Expenses of $500,000
Sales, General, & Administrative Expenses of $1,700,000

Create an income statement with amounts in thousands

What is the value of Earnings Before Interest & Taxes?

1. You are required to prepare the Sales price variance and Revenue sales quantity variance by taking any of your choice Saudi based company and suggest the suitable reasons for the variances. (3 Points)

Answer:

Playground Steel Factory is a leading manufacturer and supplier of Restaurant Seating, Tables & Other related Furniture, Indoor & Outdoor Playgrounds for Restaurants, Public & Private Parks, Public Houses, Hospitals, Schools and Furniture Seating for Shopping Centers, Sun Shades & Car Shades in the whole Kingdom of Saudi Arabia and Middle East Countries.

The Factory expected to sell 50,000 units from one of its products "Hospital seats" during 2018, the following is the planned sales and variable costs for 2018.

Sales (50,000 units)                      SR 3,000,000

Variable costs                                  1,750,000

During the year, a competitor came out with a similar hospital seats at a lower price. Management reacted by dropping its selling price for the hospital seat, but the actual sales dropped to 45,000 units at 55 SR per seat.

The cost accounting department prepare the sales price variance and revenue sales quantity variance.

1. Discuss the arguments for and against cost allocation

2. What are the differences between revenue and capital expenditures? In your explanation, discuss the accounting procedures for each type of expenditure.

4) Sharon Goodwill has worked for five years for the Pennsylvania Department of Revenue. She is an adequate employee with no substantial problems or commendations in her employment file. Recently, however, Sharon has experienced some personal problems including a divorce and a child custody battle. She has missed a substantial amount of days and has begun to make major mistakes on the job. She has been diagnosed as suffering from clinical depression.

         a) If you were Sharon’s immediate supervisor, how would you handle this situation? Apply the policy of progressive discipline to this case.

         b) If the situation resulted in several bad performance evaluations, what steps could you take to dismiss this employee?

         c) Is there just cause for firing this employee (Daugherty Standards)? What rights does the employee have in this situation?

(The following data apply to the next three questions.)

Assume the following cost and revenue data for General Hospital: Fixed costs = $15,000,000. Variable cost per inpatient day = $250. Revenue per inpatient day = $1,000.

1. What is the expected profit at a volume of 25,000 inpatient days?

a. -$3,750,000 b. $ 0 c. $1,750,000 d. $2,750,000 e. $3,750,000

2. What revenue per inpatient day is required to obtain a profit of $1,000,000 at a volume of 25,000 patient days?

a. $750 b. $790 c. $850 d. $890 e. $950

3. Which of the follow statements best describes the contribution margin?

a. The contribution margin is defined as fixed costs minus variable costs.

b. Under fee-for-service, the contribution margin is the dollar amount of each unit of service that is available first to cover fixed costs and then to contribute to profit. c. Under capitation, the contribution margin is the dollar amount of each PMPM premium that is available to pay for administration overhead.

d. The contribution margin is defined as revenues minus fixed costs.

e. Under capitation, the total contribution margin is the contribution margin multiplied by the PMPM premium rate.