• 100% Satisfaction Guarantee

Neo, Tutor
Category: Homework
Satisfied Customers: 12101
Experience:  BS Accounting
4224391
Neo is online now

# A firm produces satellite earth stations that sell for \$100,000

### Customer Question

A firm produces satellite earth stations that sell for \$100,000 each. The firm's fixed costs, F are \$2 million; 50 earth stations are produced and sold each year; profits total \$500,000; and the firms assets (all equity financed) are 5 million. The firm estimates it can change it production process, adding 4 million to investment and \$500,000 to fixed operating costs. This change will (1) reduce variable costs per unit by \$10,000 and (2) increase output by 20 units, but (3) the sales price on all units will have to be lowered to \$95,000 to permit sales of the additional output. The firm has tax loss carryforwards that cause its tax rate to be zero, its cost of equity is 15%, and it uses no debt.a. Should the firm make the change? b. Would the firm's breakeven increase or decrease if it made the change? c. Would the new situation expose the firm to more or less business risk than the old one? PLEASE SHOW ME YOUR WORK..I HAVE BREAK EVEN AT 50 & 56
Submitted: 7 years ago.
Category: Homework
Expert:  Neo replied 7 years ago.

Good day!

If you have any question about the solution, please let me know.

Thank you so much! :)

Neo, Tutor
Category: Homework
Satisfied Customers: 12101
Experience: BS Accounting
Customer: replied 7 years ago.
How did the book get the following answers?

a. ROI = 21.25% > WACC - 15%
b (1) OL(old) = 44.44% OL(new) = 47.17%
(2) Q(BEold) = 40; Q(BENew) 45.45
Expert:  Neo replied 7 years ago.

Good day!

For number (2) Q(BEold) = 40; Q(BENew) = 45.45. That is what I have computer in the b, I just rounded off the 45.45 to 46.

Can you please tell me what OL means?

Customer: replied 7 years ago.
OL = Operational Leverage, I think...also what about the ROIC in the 20's how the heck did they get that?
Expert:  Neo replied 7 years ago.

You need to spend \$3 to view this post. Add Funds to your account and buy credits.

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

### What Customers are Saying:

• Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
< Previous | Next >
• Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
• This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
• Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
• I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin Kernersville, NC
• Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther Woodstock, NY
• Thank you so much for taking your time and knowledge to support my concerns. Not only did you answer my questions, you even took it a step further with replying with more pertinent information I needed to know. Robin Elkton, Maryland
• He answered my question promptly and gave me accurate, detailed information. If all of your experts are half as good, you have a great thing going here. Diane Dallas, TX

• ### LogicPro

#### Satisfied Customers:

4925
Expert in Java C++ C C# VB Javascript Design SQL HTML
< Last | Next >

### LogicPro

#### Satisfied Customers:

4925
Expert in Java C++ C C# VB Javascript Design SQL HTML

### Manal Elkhoshkhany

#### Satisfied Customers:

4538
More than 5000 online tutoring sessions.

### Linda_us

#### Satisfied Customers:

3138
Post Graduate Diploma in Management (MBA)

### Chris M.

#### Satisfied Customers:

2602
Master's Degree, strong math and writing skills, experience in one-on-one tutoring (college English)

### F. Naz

#### Satisfied Customers:

2126
Experience with chartered accountancy

### Bizhelp

#### Satisfied Customers:

1887
Bachelors Degree and CPA with Accounting work experience