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    8 views12 pages

    Chapter 12 Assignment's Maths

    Uploaded by

    ahmedxisan179

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 12
    P17/2 Breakeven comparisons: Algebraic Jaipur Rugs, Fablndia, end Astok three carpet and rug manufacturing companies in India. Besed on the provided in the table below, answer the questions that follow. Firm Jsipor Regs Sale price per nit INR 1,500 Variable operating 300 cost per unit Fixed operating com 500,000 640,009 CHAPTER 12. Risk and Refinements in Capital Budgeting 625 a. Whats the operating break-even point in units for each firm? by -How would you rank these firms in terms oftheir risk? Break-cven point: Algebraic and graphical Fine Leather Enterprises sells its single product for $129.00 per unit. The firm’s fixed operating costs are $473,000 annu- ally, and its variable operating costs are $86.00 per unit. 2. Find the firm’s operating break-even point in units. b. Label the x-axis “Sales (units)” and the y-axis *Costs/Revenues ($),” and then graph the firm’s sales revenue, total operating cost, and fixed operating cost functions on these axes. In addition, label the operating break-even point and the areas of loss and profit (EBIT). PART FIVE Long-Term Investment Decisions (seven nals Anco an is end Giancarlo ae both lene psn, Last year they began painting original asic postards which they gave fo tht fends as holiday gifts. In addition, they began selling these at a cra fair and sold them mainly for fun. Ar the last fair, a buyer who really liked the postcards offered them a contract to paint 500 postcards of a specific design for 2,000. With the in. crease ip demand, Antonio and Giancarlo decide to open a business, calling it A&G. ‘They priced each poscard at €4.00 each. Variable operating costs amounted to an average of €1.50 per postcard. To produce the postcards for the contract, they have to buy a specific machine to cut the postcards, which will cost them €700. ‘a Calculate A&G's operating breakeven point. b. Calculate A&G’s EBIT on the contract. c. If Antonio decides to renegotiate the contract at a price of €5.00 per postcard, what will the EBIT be? 4. Ifthe buyer refuses to pay more than €4.00 per postcard, but is willing to regotiate quantity, what quantity of postcards wil result in an EBIT of €1,2002 ¢. Atthis time, A&G's postcards come in 20 different varieties. While the average : variable cost per postcard is €1.50, the actual cost varies from unit to unit. What récommendation would you give to Antonio and Giancarlo with regard to pric- ing and the numbers and types of units that they offer for sale? P12-10 egree of operating leverage: Graphical Olivetti Corporation has fixed operating costs of €850,000, variable costs of €350 pér unit of personal computers (PC) pro- duced, and a selling price of €550 per unit. a. Calculate the operating breakeven point in units of PC produced. b. Compute the degree of éperating leverage (DOL) using the following unit sales a base: 3,500, 4,000, 4,500, and 5,000. Use the formula given in the text. © Graph the DOL figures that you computed in part b (on the y-axis) against bast sales levels (on the x-axis). d, Compute the DOL at 4,250 units, and add this point to your graph. ¢. What principle do your graph and figures illustrate? y 12-12 /Break-even cath inflows and risk Taiwan Semiconductor Manofacturng Co. Lid. 7” (TSMC), one ofthe world's largest senicondacror foundries is considering biking 2 new production facility close to one of is main busines parmers. Once the fact is built, TSMC wil be the exclusive supplier for that client forthe subsequent five years. “The company is considering one of rwo plant design. The fists to build a 300 mam GGIGAFABs wafer plant, which wil cost NTS40 milion co build (NTS stands for New Taiwan dollar). The second is a 200 mm wafer plant, which will cost NT$30 million to build. The 300 mm GIGAFABs facility lows fr the production ofthe most cur- rent stateof-thesart wafers, which ae ten used forthe production of semiconductors, ‘The company estimates that ts client will oder NTS1S rion of product per year if the 300 mm GIGAFAB flys bul, but if the 200 mm wafer plant is built, TSMC expects to ell NTS10 milion worth of product annually tots lent. The company has enough rsoures to build either typeof plat, and inthe absence of sk difer ences, acept the project with the highest NPV. The cos of capital is 12%, a. Find the NPV for each project. Are the projets aceptable? b. Find the breakeven cash inlow for exch project. The company has eximated the probable of achieving various ranges of cash inflows forthe two projects as shown inthe following table. What isthe probability that each project will achieve at least the breakeven cash inflow found in part b? Probability of achieving

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