Part I: A company has fixed cost of $200,000. The sales price of its output is $56 per unit. It has variable costs of $31 per unit. The company is going to install new equipment which will cut the fixed costs to $150,000 but which will increase variable costs to $34 per unit. The sales price will remain at $56.
1) Find the break even point in the original situation.
2) Find the break even point after the cost change. (Round the breakeven point to a whole number.)
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Part II.
A company produces machinery and equipment used to lift and move equipment. During the last 20 years sales revenues have increased from $2,335,000 to $20,000,000.
1) Find the company’s growth rate using the constant growth model with annual compounding.
2) Derive a forecast for seven years in the future.
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