Explore BrainMass

Breakeven analysis, Hamada equation

This content was STOLEN from BrainMass.com - View the original, and get the solution, here!

Please help me out with the following questions:

1- A company's fixed operating costs are $ 500,000, its variable costs are $ 3.00 per unit, and the products sales price is $ 4.00. What is the company's breakeven point; that is, at what unit sales volume would its income equal its costs?


2-Assuming that the firm uses only debt and common equity, what is Jackson's optimal capital structure? At what debt ratio is the company's WACC minimized?


4-Unlevered beta. Harley Motors has $ 10 million in assets, which were financed with $ 2 million of debt and $ 8 million in equity. Harley's beta is currently 1.2 and its tax rate is 40 percent. Use the Hamada equation to find Harley's unlevered beta, bU.

6-Breakeven analysis. The Weaver Watch Company sells watches for $ 25; the fixed costs are $ 140,000; and variable costs are $ 15 per watch.

a. What is the firms gain or loss at sales of 8,000 watches? At 18,000 watches?

b. What is the breakeven point? Illustrate by means of a chart.

c. What would happen to the breakeven point if the selling price were raised to $ 31? What is the significance of this analysis?

d. What would happen to the breakeven point if the selling price were raised to $ 31 but variable costs rose to $23 a unit?

© BrainMass Inc. brainmass.com September 19, 2018, 11:26 am ad1c9bdddf - https://brainmass.com/business/weighted-average-cost-of-capital/breakeven-analysis-hamada-equation-216665

Solution Summary

This solution is comprised of important Breakeven and Hamada equation problems.