Chapter 16 CFIN6
Chapter 16 Solutions
16-1 The following table shows the initial forecast and the AFN:
Current Growth Initial Forecast
Total assets $800,000 x 1.20 $960,000
Accounts payable/Accruals $150,000 x 1.20 $180,000
Notes payable 25,000 25,000
AFN $124,000
Sales $250,000 x 1.20 $300,000
Net profit margin 5.0% 5.0%
Net income $ 12,500 $ 15,000
16-2 The following table shows the initial forecast and the AFN:
Current Growth Initial Forecast
Total assets $400,000 x 1.15 $460,000
Accounts payable $125,000 x 1.15 $143,750
Notes payable 0 0
Long-term debt 37,000 37,000
Common stock 140,000 +$15,000 155,000
Retained earnings 98,000 +20,770 118,700
$400,000 $454,450
AFN $ 5,550
Sales $500,000 x 1.15 $575,000
feedbacks) in new long-term debt financing to support the 15 percent planned growth.
Chapter 16 CFIN6
16-3
$810,000
Full capacity sales $900,000
0.90
==
16-5
OpBE F $1,500
= = = 200 units
QP – V $25.00 $17.50−
SOpBE = 200 x $25 = $5,000 =
( )
()
F $1,500 $1,500
= =
$17.50
V0.30
1 – 1
P$25.00
−
b. At 10,000 units,
Sales = 10,000 x $250 $2,500,000
Variable CGS = 10,000 x $150 (1,500,000)
Gross profit $1,000,000
Fixed operating costs ( 600,000)
EBIT = NOI $ 400,000
Chapter 16 CFIN6
16-8 Selling price = $575
Fixed operating costs = $690,000
Variable operating costs = 70% x Sales
a. Sales = 6,000 machines:
Gross profit 6,000[$575 $575(0.7)] $1,035,000
DOL 3.0
EBIT 6,000[$575 $575(0.7)] $690,000 $345,000
−
= = = =
−−
16-9 Selling price = $200
Fixed operating costs = $640,000
Variable operating costs = $120
a.
OpBE F $640,000
= = = 8,000 units
QP – V $200 $120−
SOpBE = 8,000 x $200 = $1,600,000 =
( )
()
F $640,000 $640,000
= =
$120
V0.40
1 – 1
P$200
−
Chapter 16 CFIN6
16–10 Selling price = $1,400
Fixed operating costs = $420,000
Variable operating costs = 80% of sales
b. ODM: Sales = 2,000 units
=
−
= = = =
−−
Q 2,000 Gross profit 2,000[$1,400 $1,400(0.8)] $560,000
DOL 4.0
EBIT 2,000[$1,400 $1,400(0.8)] $420,000 $140,000
Sales = 2,000 x $1,400 $2,800,000
Variable CGS = 2,000 x ($1,400)(0.8) (2,240,000)
Gross profit $ 560,000
Fixed operating costs ( 420,000)
EBIT = NOI $ 140,000
CWI: Sales = 2,500 units
=
−
= = = =
−−
Q 2,500 Gross profit 2,500[$1,400 $1,400(0.8)] $700,000
EBIT 2,500[$1,400 $1,400(0.8)] $420,000 $280,000
16–11 EBITFinBE = $100,000(0.10) + $240,000(0.08) = $10,000 + $19,200 = $29,200
16–12 Interest = $15,000(0.09) + $48,000(0.06) = $1,350 + $2,880 = $4,230
Chapter 16 CFIN6
16–13 a. EBIT $99,000
Interest (33,000) = $300,000 x 0.11
Earnings before taxes (EBT) $66,000
Taxes (30%) (19,800)
Net Income $46,200
EBIT $99,000
DFL 1.5
EBT $66,000
= = =
( )
( )
$18,480
Dps 1 0.30
1T
EBIT $99,000 $99,000
DFL 2.5
$39,600
$99,000 $33,000
EBIT I −
−
= = = =
−−
−+
16–14 Net income = $46,800
Marginal tax rate = 35%
Interest = $36,000
16–15 EBIT = $2,250
Marginal tax rate = 40%
Interest = $1,000
Shares of common stock = 500
Chapter 16 CFIN6
16–16 DOL = 3.5
DFL = 2.0
a. DTL = DOL x DFL = 3.5 x 2.0 = 7.0
16–17 DFL = 4.0
DTL = 10.0
Sales = $600,000
Profit margin = 8%
a. DTL = DOL x DFL
DOL = 10.0/4.0 = 2.5
16–18 Sales = $400,000
EBIT = $125,000
DOL = 2.0
Actual EBIT = $125,000[1 + (-0.10)(2.0)] = $125,000(0.80) = $100,000
DTL = DOL x DFL = 2.0 x 4.0 = 8.0
Actual EPS = $2.50[1 + (-0.10)(8.0)] = $2.50(0.20) = $0.50
16–19 Selling price = $180
Variable cost per unit = $135
Chapter 16 CFIN6
Marginal tax rate = 40%
Sales = 11,000
Gross profit 11,000[$180 $135] $495,000
DOL 4.0
EBIT 11,000($180 $135) $371,250 $123,750
−
= = = =
−−
16–20 Selling price = $10
Variable cost per unit = 75% of selling price = $10(0.75) = $7.50
Fixed operating costs = $100,000
Interest = $37,500
Marginal tax rate = 35%
Sales = 65,000
b.
Gross profit 65,000($10.00 $7.50) $162,500
DOL 2.6
EBIT 65,000($10.00 $7.50) $100,000 $62,500
−
= = = =
−−
EBIT 65,000($10.00 $7.50) $100,000 $62,500
DFL 2.5
EBT 65,000($10.00 $7.50) $100,00 $37,500 $25,000
−−
= = = =
− − −