Last Updated 10 Jul 2021

Managerial Finance And Team Assignment

Category Corporations, Finance
Essay type Research
Words 283 (1 page)
Views 141

Principles of Managerial Finance

Break even analysis. Barry Carter is considering opening a music store. He wants to estimate the number of CDs he must sell to break even. The CDs will be sold for $13. 98 each, variable operating costs are $10. 48 per CD, and annual fixed operating costs are $73,500.

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  • Find the operating breakeven point in number of CDs. Q= FC / P- VC Q= 73,500 / 13. 98 – 10. 48 Q= 21,000 CDs B) Calculate the total operating costs at the breakeven volume found in part a.

If Barry estimates that at a minimum he can sell 2,000 CDs per month, should he go into the music business? 2,000 CDs per month x 12 months = 24,000 CDs. Since the operating breakeven point in number of CDs is 21,000, this means that Barry will sell 3,000 more CDs that will be a profit. Depending on Barry’s outcome of the music store, if he were to go into the music business and sell 2,000 CDs a month, he would make a profit. The profit would not be that much more above the operating breakeven point; however, it will still be a profit. I would take the chance and go into the music business.

The lessee will exercise its option to purchase the asset for $24,000 at termination of the lease. Purchase If the firm purchases the machine, its cost of $80,000 will be financed with a 5-year, 14% loan requiring equal end-of-year payments of $23,302. The machine will be depreciated under MACRS using a 5-year recovery period. The firm will pay $2,000 per year for a service contract that covers all maintenance costs; insurance and other costs will be borne by the firm.

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Managerial Finance And Team Assignment. (2018, Oct 16). Retrieved from https://phdessay.com/managerial-finance-and-team-assignment/

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