Breakeven analysis, Hamada equation
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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?
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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?
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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.
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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?
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Solution Summary
This solution is comprised of important Breakeven and Hamada equation problems.
Education
- MBA, Indian Institute of Finance
- Bsc, Madras University
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