5. Financial Data for four automotive parts manufacturers is given below: Pegasus Delphi Dragon Industries XYZ, Inc. Automotive PLC. Auto Inc. Inc. $70 $90 $120 $100 Selling 1,200,000 900,000 700,000 1,000,000 Unit Sales 8 9 10 7 Interest Earned 57% 55% 53% 60% Variable Costs (% of Sales) $9,000,000 $12,000,000 $10,000,000 $11,000,000 Fixed Costs 11% 10% 9% 8% Return on Common Equity $120,000,000 110,000,000 150,000,000 $140,000,000 Common Equity 13,000,000 12,000,000 15,000,000 14,000,000 Common Shares a. Using the financial data given in the above table, create income statements for each firm. Assume a common tax rate of 40% for each company. Worksheet: Formulas: b. Determine the break-even points in both units and dollars, and the degrees of operating, financial, and combined leverage for each firm.
5. Financial Data for four automotive parts manufacturers is given below: XYZ, Inc. Delphi Automotive PLC. Dragon Auto Inc. Pegasus Industries Inc. Selling $70 $90 $120 $100 Unit Sales 1,200,000 900,000 700,000 1,000,000 Interest Earned 8 9 10 7 Variable Costs (% of Sales) 57% 55% 53% 60% Fixed Costs $9,000,000 $12,000,000 $10,000,000 $11,000,000 Return on Common Equity 11% 10% 9% 8% Common Equity $120,000,000 110,000,000 150,000,000 $140,000,000 Common Shares 13,000,000 12,000,000 15,000,000 14,000,000 a. Using the financial data given in the above table, create income statements for each firm. Assume a common tax rate of 40% for each company. Worksheet: Formulas: b. Determine the break-even points in both units and dollars, and the degrees of operating, financial, and combined leverage for each firm.
IM_Chapter_6_IM_Problem_Set.docx