A neighborhood restaurant opens for lunch only and has a menu limited to five meals. The history of each menu item relative to its percentage of total sales, selling price (SP), and variable costs (VC) are shown in the following table: Menu Item SP VC SR% Food 1 $15.00 $7.75 16% Food 2 12.95 7.50 20 Food 3 11.00 5.50 22 Food 4 8.95 2.85 14 Food 5 9.95 6.50 8 Total variable cost of beverages averages 55 percent. The restaurant has fixed costs of $546,000 a year and wants an operating income (before tax) of at least $25,000 per year. What level of sales revenue will give the desired operating income be- fore tax?

Breakeven, Target Profit, Margin of Safety, Operating Leverage

Pike Street Taffy makes and sells taffy in a variety of flavours in a shop located in the local public market. Data for a recent week are as follows:

All employees work standard shifts, no matter how much taffy is produced or sold.

REQUIRED

A.

Calculate the breakeven point in units and in revenue.

B.  

Calculate the number of units and the amount of revenues that would be needed for after-tax income of $3,000.

C.  

Calculate the margin of safety in units and the margin of safety percentage.

D.  

Calculate the degree of operating leverage.

Dyson Inc. currently finances with 20.0% debt (i.e., w_d = 20%), but its new CFO is considering changing the capital structure so w_d = 74.5% by issuing additional bonds and using the proceeds to repurchase and retire common shares so the percentage of common equity in the capital structure (w_c) = 1 – w_d. Given the data shown below, by how much would this recapitalization change the firm's cost of equity? Do not round your intermediate calculations. (Hint: You must unlever the current beta and then use the unlevered beta to solve the problem.)

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multiple choice

Suppose the company E-bikes R US has an isocost line that crosses the isoquant twice.
To cost minimize, E-bikes R US will
A) use a different isocost line to select the bundle of inputs.
B) use the input bundle associated with the intersection on the higher point of the isoquant.
C) use the input bundle associated with the intersection on the lower point of the isoquant.
D) Both B and C.

Suppose Bob consumes e-bikes and scooters. If Bob’s income and prices of both goods
increase by the same percentage,
A) Bob will buy more of both goods.
B) Bob will buy more of both goods if they are both normal goods.
C) Bob will buy less of both goods if they are both inferior goods.
D) Bob’s utility maximizing bundle stays the same.

Easy Car Corp. is a grocery store located in the Southwest. Next year dividend is ​$2.00 and plans to increase the dividend annually at the rate of 3.0​%. It currently has 1,000,000 common shares outstanding. The shares currently sell for ​$10 each. Two years ago, Easy Car Corp. issued 40,000 semiannual 20-year bonds with a coupon rate of 8​% and a par value of ​$1,000. The bonds currently have a yield to maturity​ (YTM) of 11%. What is the weighted average cost of capital (WACC) for Easy Car Corp. if the corporate tax rate is 40%?

When answering this problem enter your answer using percentage notation but do not use the % symbol and use two decimals (rounding). For example, if your answer is 0.10469 then enter 10.47; if your answer is 10% then enter 10.00

Partial income statements for Sherwood Company summarized for a four-year period show the following:

An audit revealed that in determining these amounts, the ending inventory for 2015 was overstated by $20,000. The inventory balance on December 31, 2016, was accurately stated. The company uses a periodic inventory system.

1. Restate the partial income statements to reflect the correct amounts, after fixing the inventory error.

2-a. Compute the gross profit percentage for each year (a) before the correction and (b) after the correction. (Round your answers to the nearest whole percent.)

2-b. Do the results lend confidence to your corrected amounts?

Suppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $74k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $115k per year until you retire at age 65. The master’s program you are interested in costs $22k per year.

Note: The term “k” is used to represent thousands (× $1,000).

Required: At an opportunity cost of 7%, determine the percentage difference between your most and least profitable alternatives, with the least profitable option as the basis for your calculation.

Pharoah Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

Compute the estimated inventory at May 31, assuming that the gross profit is 25% of net sales.

eTextbook and Media

Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost. (Round percentage of sales to 2 decimal places, e.g. 78.74% and final answer to 0 decimal places, e.g. 6,225.)

Suppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $75k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $113k per year until you retire at age 55. The master’s program you are interested in costs $22k per year. Note: The term “k” is used to represent thousands (× $1,000). Required: At an opportunity cost of 9%, determine the percentage difference between your most and least profitable alternatives, with the least profitable option as the basis for your calculation.

Suppose that, at age 30, you might wish to leave your job and pursue a master’s degree. If you choose to remain at your job, your employer would pay you $75k per year until retirement, at age 55. If you go back to the university, you would have to sacrifice 2 years of income, but once you graduate, you would receive $113k per year until you retire at age 55. The master’s program you are interested in costs $22k per year.

Note: The term “k” is used to represent thousands (× $1,000).

Required: At an opportunity cost of 9%, determine the percentage difference between your most and least profitable alternatives, with the least profitable option as the basis for your calculation.