Ch 11 Online HW

Jake's Tree farm is evaluating a proposal to plant​ 5,000 ornamental trees at an initial cost of​ $10,000. The trees will be sold in 5 years. What is the minimum after tax cash flow from selling the trees that will allow the tree planting project to reach break even​ NPV? Use a discount rate of​ 12%. A.$17,623.42 B.$17,958.56 C.$12,000.00 D.$5,674.26

A.$17,623.42

Boulangerie Bouffard expects to sell 1 million croissants next year for​ $1.25 each. Variable cost of a croissant is​ $0.75. Fixed costs are​ $150,000, depreciation​ $200,000 and the tax rate is​ 25%. If the bakery can increase the price of a croissant to​ $1.50 and all other variables remain the​ same, free cash flow will increase by A.$187,500. B.$250,000. C.$37,500. D.$150,000.

A.$187,500.

Excom Fiberoptics is bidding on contracts to sell micro test tubes for biotechnology research. in sets of​ 1,000 tubes. Fixed costs including depreciation associated with the project are​ $2,000,000, variable cost per set is​ $16. Excom expects to sell​ 250,000 sets. What is the minimum price it can charge and reach the accounting break−even ​point? A.$24 B.$20 C.$12 D.$8

A.$24

Quineboag Textiles In. has calculated​ it's degree of operating leverage at 3.00. If Quineboag can increase sales from​ $5,000,000 to​ $5,250,000, operating income should increase from​ $500,000 to A.$575,000 B.$515,000 C.$650,000 D.$1,500,000

A.$575,000

Accounting break−even analysis uses A.sales, variable costs and fixed costs for a single period. B.sales, variable costs and fixed costs over the entire life of a project. C.free cash flows over the entire life of a project. D.free cash flows for a single period.

A.sales, variable costs and fixed costs for a single period.

Betty Gilmore plans to sell berry pies at a local​ farmer's market. The permit and space rental will cost her​ $2,000 for the June through August season. The pies will sell for​ $7.00. Ingredients and overhead average​ $4.00 per pie. She also has to pay five percent of her gross sales to the​ markets's organizers. How many pies will she need to sell to cover her fixed costs and realize a​ $3,000 profit? A.1,250 pies B.1,887 pies. C.1,667 pies D.752

B.1,887 pies.

Betty Gilmore plans to sell berry pies at a local​ farmer's market. The permit and space rental will cost her​ $2,000 for the June through August season. The pies will sell for​ $7.00. Ingredients and overhead average​ $4.00 per pie. She also has to pay five percent of her gross sales to the​ markets's organizers. How many pies will she need to sell to cover her fixed​ costs? A.667 pies with a very small profit on the last pie. B.755 pies with a very small profit on the last pie. C.301 pies D.She can never break even.

B.755 pies with a very small profit on the last pie.

The Oviedo Thespians are planning to present performances of their Florida Revue on 2 consecutive nights in January. It will cost them​ $5,000 per night for theater​ rental, event insurance and professional musicians. The theater will also take​ 10% of gross ticket sales. How many tickets must they sell at​ $10.00 per ticket to raise​ $1,000 for their​ organization? A.1,112 tickets B.​1,223 tickets C.1000 tickets D.There is not enough information

B.​1,223 tickets

Enchanted Hearth expects to sell​ 1,200 wood pellet stoves in 2011 at an average price of​ $2,400 each. It believes that unit sales will grow between minus−​5% and​ +5% per year and prices will rise or fall by as much as​ 5% per year. Forecast sales revenue for 2013 if the number of units sold increases by​ 5% per year and prices remain flat. A.​$2,880,000 B.$3,333,960 C.$3,175,200 D.$3,168,000

C.$3,175,200

The Oviedo Thespians are planning to present performances of their Florida Revue on 2 consecutive nights in January. It will cost them​ $5,000 per night for theater​ rental, event insurance and professional musicians. The theater will also take​ 10% of gross ticket sales. How many tickets must they sell at​ $10.00 per ticket to break​ even? A.1000 tickets B.1,223 tickets C.1,112 tickets D.There is not enough information

C.1,112 tickets

There is a​ 30% probability that an office building will be sold after 5 years for​ $30 million, a​ 50% probability that it will be sold for​ $20 million and a​ 20% probability that it will be sold for​ $10 million. What is the expected value of the office building in 5​ years? A.$30 million B.$20 million C.$10 million D.$21 million

D.$21 million

Miller River Light is evaluating a project that will require an initial investment of​ $350,000. Miller River uses a​ 12% discount rate for capital projects of this type. What level of operating cash flows over a period of 5 years will cause the project to reach break−even ​NPV? Assume cash flows come in the form of an end−of−the-year annuity. A.$70,000.00 B.$86,690.54 C.​$92,329.12 D.$97,093.41

D.$97,093.41

Variable cost for​ Light.com's fluorescent tubes is​ $12.50, the tubes are sold over the internet to businesses and organizations for​ $20.00 each. Fixed costs are​ $7,500,000. What is the break−even quantity for the fluorescent​ tubes? A.7,500,000 B.​375,000 C.600,000 D.1,000,000

D.1,000,000

Charlestown​ Marina's forecasts indicate that if slip rentals equal​ $500,000, net operating income will be​ $25,000 and if rentals equal​ $525,000, net operating income will be​ $37,500. What is​ Charletown's degree of operating​ leverage? A..05 B.2 C..10 D.10

D.10

Brookfield Heavy Equipment is considering a project that will produce after tax cash of​ $40,000 per year for 5 years. The project will require an initial investment of​ $144,191. At what discount rate will the project reach break−even ​NPV? A.8% B.11.11% C.10% D.12%

D.12%

Variable cost for​ Light.com's fluorescent tubes is​ $12.50, the tubes are sold over the internet to businesses and organizations for​ $20.00 each. Fixed costs are​ $7,500,000. $500,000 in depreciation expense is included in fixed costs. What is the cash break−even quantity for the fluorescent​ tubes? A.​1,066,667 B.​375,000 C.1,000,000 D.933,333

D.933,333

At the break−even NPV point A.the present value of operating cash flows equals the initial amount invested. B.the​ project's IRR is equal to the​ project's required rate of return. C.The NPV of the project is equal to zero. D.all of the above

D.all of the above

Accounting break−even analysis solves for the level of sales that will result in A.Free cash flow​ = $0.00. B.IRR=Cost of Capital. C.NPV​ = $0.00. D.net income​ = $0.00.

D.net income​ = $0.00.

Dudster​ company's DOL is 2. If sales increase by​ 10%, NOI will increase by​ 5%. True False

False