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# Assignment 8.1: Warm-Up Exercises, Chapter 13 E13-1 Canvas

Assignment 8.1: Warm-Up Exercises, Chapter 13

E13-1 Canvas Reproductions has fixed operating costs of \$12,500 and variable operating costs of \$10 per unit and sells its paintings for \$25 each. At what level of unit sales will the company break even in terms of EBIT?

E13-2 The Great Fish Taco Corporation currently has fixed operating costs of \$15,000, sells its premade tacos for \$6 per box, and incurs variable operating costs of \$2.50 per box. If the firm has a potential investment that would simultaneously raise its fixed costs to \$16,500 and allow it to charge a per-box sale price of \$6.50 due to better-textured tacos, what will the impact be on its operating breakeven point in boxes?

E13-3 Chico's has sales of 15,000 units at a price of \$20 per unit. The firm incurs fixed operating costs of \$30,000 and variable operating costs of \$12 per unit. What is Chico's degree of operating leverage (DOL) at a base level of sales of 15,000 units?

E13-4 Parker Investments has EBIT of \$20,000, interest expense of \$3,000, and preferred dividends of \$4,000. If it pays taxes at a rate of 38%, what is Parker's degree of financial leverage (DFL) at a base level of EBIT of \$20,000?

E13-5 Cobalt Industries had sales of 150,000 units at a price of \$10 per unit. It faced fixed operating costs of \$250,000 and variable operating costs of \$5 per unit. The com¬pany is subject to a tax rate of 38% and has a weighted average cost of capital of 8.5%. Calculate Cobalt's net operating profits after taxes (NOPAT), and use it to estimate the value of the firm.
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