PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 10, Problem 32PS
a)
Summary Introduction
To discuss: The present situation by drawing decision tree.
b)
Summary Introduction
To determine: Whether the purchase of piston plane will expand if demand turns out to be high in the first year.
c)
Summary Introduction
To determine: Whether person X recommend that person M buy the turboprop or the piston-engine plane today.
d)
Summary Introduction
To determine: The
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Arnold Vimka is a venture capitalist facing two alternative Investment opportunities. He intends to invest $1,000,000 in a start-up firm.
He is nervous, however, about future economic volatility. He asks you to analyze the following financial data for the past year's
operations of the two firms he is considering and give him some business advice.
Variable cost per unit (a)
Sales revenue (8,100 units × $28.00)
Variable cost (8,100 units x a)
Contribution margin.
Fixed cost
Net income
Required A
Variable cost per unit
Sales revenue
Variable cost
Contribution margin
Required
a. Use the contribution margin approach to compute the operating leverage for each firm.
b. If the economy expands in coming years, Larson and Benson will both enjoy a 11 percent per year Increase in sales, assuming that
the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note:
Since the number of units Increases, both revenue and variable cost will…
Chapter 10 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 10 - Terminology Match each of the following terms to...Ch. 10 - Project analysis True or false? a. Sensitivity...Ch. 10 - Sensitivity analysis Otobais staff (see Section...Ch. 10 - Prob. 4PSCh. 10 - Prob. 7PSCh. 10 - Scenario analysis What is the NPV of the electric...Ch. 10 - Prob. 9PSCh. 10 - Break-even analysis Break-even calculations are...Ch. 10 - Prob. 11PSCh. 10 - Prob. 12PS
Ch. 10 - Prob. 13PSCh. 10 - Break-even analysis A financial analyst has...Ch. 10 - Fixed and variable costs In a slow year, Deutsche...Ch. 10 - Operating leverage You estimate that your cattle...Ch. 10 - Prob. 17PSCh. 10 - Prob. 20PSCh. 10 - Real options Explain why options to expand or...Ch. 10 - Prob. 22PSCh. 10 - Real options True or false? a. Decision trees can...Ch. 10 - Prob. 24PSCh. 10 - Real options An auto plant that costs 100 million...Ch. 10 - Decision trees Look back at the Vegetron electric...Ch. 10 - Prob. 27PSCh. 10 - Prob. 28PSCh. 10 - Prob. 29PSCh. 10 - Prob. 32PS
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- Arnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $1,000,000 in a start-up firm. He is nervous, however, about future economic volatility. He asks you to analyze the following financial data for the past year's operations of the two firms he is considering and give him some business advice. Variable cost per unit (a) Sales revenue (8,300 units × $29.00) Variable cost (8,300 units x a) Contribution margin Fixed cost Net income Required a. Use the contribution margin approach to compute the operating leverage for each firm. b. If the economy expands in coming years, Larson and Benson will both enjoy a 11 percent per year increase in sales, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage. (Note: Since the number of units increases, both revenue and variable cost will increase.) c. If the economy contracts in coming years, Larson and Benson will both…arrow_forwardArnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $1,000,000 in a start-up firm. He is nervous, however, about future economic volatility. He asks you to analyze the following financial data for the past year's operations of the two firms he is considering and give him some business advice. Variable cost per unit (a) Sales revenue (8,100 units $30.00) Variable cost (8,100 units a). Contribution margin Fixed cost Net income Company Name Larson $18.00 $243,000 (145,800) $ 97,200 (25,000) $ 72,200 Company Name Operating leverage Benson $9.00 Required a. Use the contribution margin approach to compute the operating leverage for each firm. b. If the economy expands in coming years, Larson and Benson will both enjoy a 10 percent per year increase in sales, assuming that the selling price remains unchanged. Compute the change in net income for each firm in dollar amount and in percentage (Note: Since the number of units increases, both…arrow_forwardArnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $1 million in a start-up firm. He is nervous, however, about future economic volatility. He asks you to analyze the following financial data for the past year’s operations of the two firms he is considering and give him some business advice. Company Name Larson Benson Variable cost per unit (a) $ 19.00 $ 9.50 Sales revenue (8,100 units × $28.00) $ 226,800 $ 226,800 Variable cost (8,100 units × a) (153,900 ) (76,950 ) Contribution margin $ 72,900 $ 149,850 Fixed cost (24,300 ) (101,250 ) Net income $ 48,600 $ 48,600 Required Use the contribution margin approach to compute the operating leverage for each firm. If the economy expands in coming years, Larson and Benson will both enjoy a 11 percent per year increase in sales, assuming that the selling price remains unchanged. Compute the change in net income for…arrow_forward
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