A firm needs $200,000 to start and expects Sales $300,000 Expenses $285,000 Tax rate 40% a. What are earnings if the owners invest the $200,000? b. If the firm borrows 40% of the $200,000 at an interest rate of 10%, what are the firm's net earnings? c. What is the return on the owners' investment in each case? Why do the returns differ?

A firm needs $200,000 to start and expects Sales $300,000 Expenses $285,000 Tax rate 40% a. What are earnings if the owners invest the $200,000? b. If the firm borrows 40% of the $200,000 at an interest rate of 10%, what are the firm's net earnings? c. What is the return on the owners' investment in each case? Why do the returns differ?

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter4A: Nopat Breakeven: Revenues Needed To Cover Total Operating Costs

Section: Chapter Questions

Problem 1EP

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