1. Suppose IBM stock, expected dividend = $3, Mkt. price, P0 = $60, growth rate, g = 8%, what would be the rate of return?

IBM Stock, current dividend is $2.50, Mkt. price, P0 = $60, growth rate, g = 8%, what would be the rate of return?

What is the difference between and 2? Selling price per unit is $10, Variable cost per unit is $6, and Fixed costs are $100,000, What is the breakeven quantity?

Break-even quantity in units = $100,000/ ($10-$6) = 25,000 units

Break even in sales= 25,000 x 10 = $250,000

EBIT = $6000, variable cost = 40% of sales, FC =$600, Q = 500 units, calculate P.

Using the EBIT formula listed above:

6000 = 500 x P - [0.40 x 500 x P + 600], solve for P

P = $18.00 -EBIT for both A and B are $50,000, Debt at 10% = $100,000 for A and $60,000 for B. Calculate DFL for A and B.

-DFL = EBIT/(EBIT - INT.)

DFL for A = 50,000/(50,000 - 10,000) = 1.25

-DFL for B = 50,000/(50,000 -6,000) = 1.14

-Make sure it is the annual Interest that enters into the DFL formula and not the amount of debt.

-EBIT = S(1-VC) - FC see HW problem 4a

EBIT = Sales - total variable cost - FC ;