財務(wù)管理課后習(xí)題5

Chapter5Exercises

5-1.ShockElectronicssellsportableheatersfor$25perunitandthevariablecosttoproducethemis$17.Mr.Ampsestimatesthatthefixedcostsare$96,000.

Computethebreak-evenpointinunits.

Fillinthetablebelow(indollars)toillustratethatthebreak-evenpointhasbeenachieved.

Solution:

Sales

–Fixedcosts

–totalvariablecosts Netprofit(loss)

ShockElectronics

BE

Fixedcosts

Price-variablecostperunit

$96,000

$25$17

$96,00012,000units

$8

Sales $300,000(12,000units*$25)

–Fixedcosts 96,000

–Totalvariablecosts 204,000(12,000units*$17)Netprofit(loss) $ 0

5-3. TherapeuticSystemssellsitsproductsfor$8perunit.Ithasthefollowingcosts:

Rent $120,000

Factorylabor $1.50perunitExecutivesalaries $112,000

Rawmaterial $ .70perunit

Separatetheexpensesbetweenfixedandvariablecostperunit.Usingthisinformationandthesalespriceperunitof$6,computethebreak-evenpoint.

Solution:

TherapeuticSystems

FixedCosts

VariableCosts(perunit)

Rent

$120,000

Factorylabor

$1.50

Executivesalaries

$112,000

Rawmaterials

.70

$232,000

$2.20

BE

FC

PVC

$232,000

$8.00$2.20

$232,00040,000units

$5.80

5-4. Drawtwobreak-evengraphs—oneforaconservativefirmusinglabor-intensiveproductionandanotherforacapital-intensivefirm.Assumingthesecompaniescompetewithinthesameindustryandhaveidenticalsales,explaintheimpactofchangesinsalesvolumeonbothfirms'profits.

Solution:

Labor-Intensiveandcapital-intensivebreak-evengraphs

Labor-Intensive Capital-Intensive

Revenueandcosts

Totalrevenue

Totalcosts

Totalrevenue

Profits

BE Variable

Cost

Fixedcosts

Revenueandcosts

Totalcosts

Profits

BE

VariableCost

Fixedcosts

Unitsproducedandsold Unitsproducedandsold

Thecompanyhavingthehighfixedcostswillhavelowervariablecoststhanitscompetitorsinceithassubstitutedcapitalforlabor.Withalowervariablecost,thehighfixedcostcompanywillhavealargercontributionmargin.Therefore,whensalesrise,itsprofitswillincreasefasterthanthelowfixed

costfirmandwhenthesalesdecline,thereversewillbetrue.

5-8. TheHardingCompanymanufacturesskates.Thecompany'sincomestatementfor2001isasfollows:

HardingCompanyIncomeStatement

FortheYearEndedDecember31,2001

Sales(10,000skates@$50each)...........................

$500,000

Less:Variablecosts(10,000skatesat$20)........

200,000

Fixedcosts......................................................

150,000

Earningsbeforeinterestandtaxes(EBIT)..............

150,000

Interestexpense.......................................................

60,000

Earningsbeforetaxes(EBT)...................................

90,000

Incometaxexpense(40%)......................................

36,000

Earningsaftertaxes(EAT).....................................

$54,000

Giventhisincomestatement,computethefollowing:

Degreeofoperatingleverage.

Degreeoffinancialleverage.

Degreeofcombinedleverage.

Break-evenpointinunits(numberofskates).

Solution:

HardingCompany

Q=10,000,P=$50,VC=$20,FC=$150,000,I=$60,000

DOL QPVC

QPVCFC

10,000$50$20

10,000$50$20$150,000

10,000$30

10,000$30$150,000

$300,000

$300,000$150,000

$300,0002.00x

$150,000

DFL

EBITEBITI

$150,000

$150,000$60,000

$150,0001.67x

$90,000

Q

DCL

QPVC

PVCFCI

10,000

$50$20$150,000$60,000

10,000$50$20

$10,000$30 $300,0003.33x

$10,000$30$210,000 $90,000

BE

$150,000

$50$20

$150,0005,000skates

$30

5-12. SterlingOpticalandRoyalOpticalbothmakeglassframesandeachisabletogenerateearningsbeforeinterestandtaxesof$120,000.

TheseparatecapitalstructuresforSterlingandRoyalareshownbelow:

Sterling

Royal

Debt@12% $

600,000

Debt@12% $

200,000

Commonstock,$5par 400,000

Commonstock,$5par..

800,000

Total $1,000,000

Total..........................

$1,000,000

Commonshares................ 80,000

Commonshares.............

160,000

Computeearningspershareforbothfirms.Assumea25percenttaxrate.

Inparta,youshouldhavegottenthesameanswerforbothcompanies'

Solution:

a.

earningspershare.AssumeaP/Eratioof20foreachcompany,whatwoulditsstockpricebe?

Nowaspartofyouranalysis,assumetheP/Eratiowouldbe16fortheriskiercompanyintermsofheavydebtutilizationinthecapitalstructureand25forthelessriskycompany.Whatwouldthestockpricesforthetwofirmsbeundertheseassumptions?(Note:Althoughinterestratesalsowouldlikelybedifferentbasedonrisk,weholdthemconstantforeaseofanalysis).

Basedontheevidenceinpartc,shouldmanagementonlybeconcernedabouttheimpactoffinancingplansonearningspershareorshouldstockholders'wealthmaximization(stockprice)beconsideredaswell?

SterlingOpticalandRoyalOptical

Sterling

Royal

EBIT

$120,000

$120,000

Less:Interest

72,000

24,000

EBT

48,000

96,000

Less:Taxes@25%

12,000

24,000

EAT

36,000

72,000

Shares

80,000

160,000

EPS

$.45

$.45

Stockprice =P/E*EPS

20*$.45=$9.00

Sterling Royal

16*$.45=$7.20 25*$.45=$11.25

Clearly,theultimateobjectiveshouldbetomaximizethestockprice.Whilemanagementwouldbeindifferent

betweenthetwoplansbasedonearningspershare,Royal

Optical,withthelessriskyplan,hasahig