1. The company “ABC”, produces electronic control equipment, it uses 1,600 units annually of a certain product. The cost of the order is $50 per order, and the maintenance cost is $1 per unit a year (annual cost of maintenance is 25%, purchasing price is $4 per unit). Determine the EOQ.
Can you show me the procedure?
2. If the debt ratio is 50%, the interest rate on all debt is 8%, the tax rate is 50%, and the ROE is 10%, then the ratio of EBIT to total assets, or the basic earning power ratio, must be
Can you show the procedure?
3. Howell Enterprises is forecasting EPS of $4.00 per share for next year. The firm has 10,000 shares outstanding, it pays 12% interest on its debt, and it faces a 40% marginal tax rate. Its estimated fixed costs are $80,000 while its variable costs are estimated at 40% of revenue. The firm’s target capital structure is 40% equity and 60% debt and it has total assets of $400,000. On what level of sales is Howell basing its EPS forecast.
Can you show the procedure?