1.A company's fixed operating costs are $360,000, its variable costs are $2.95 per unit, and the product's sales price is $5.90. What is the company's break-even point; that is, at what unit sales volume will its income equal its costs? Round your answer to the nearest whole number. _________units

2.Hartman Motors has $11 million in assets, which were financed with $3.3 million of debt and $7.7 million in equity. Hartman's beta is currently 1.45, and its tax rate is 30%. Use the Hamada equation to find Hartman's unlevered beta, bU. Do not round intermediate calculations. Round your answer to two decimal places.

bU=

3.Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $13 million in invested capital, has $1.95 million of EBIT, and is in the 40% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 60% and pays 11% interest on its debt, whereas LL has a 30% debt-to-capital ratio and pays only 9% interest on its debt. Neither firm uses preferred stock in its capital structure.

a. Calculate the return on invested capital (ROIC) for each firm. Round your answers to two decimal places.

ROIC for firm LL is______%

ROIC for firm HL is______%

b. Calculate the rate of return on equity (ROE) for each firm. Round your answers to two decimal places.

ROE for firm LL is_______%

ROE for firm HL is______%

c. Observing that HL has a higher ROE, LL's treasurer is thinking of raising the debt-to-capital ratio from 30% to 60% even though that would increase LL's interest rate on all debt to 15%. Calculate the new ROE for LL. Round your answer to two decimal places.

%________

4.The Warren Watch Company sells watches for $24, fixed costs are $195,000, and variable costs are $14 per watch.

a. What is the firm's gain or loss at sales of 6,000 watches? Enter loss (if any) as negative value. Round your answer to the nearest cent.

$__________

What is the firm's gain or loss at sales of 16,000 watches? Enter loss (if any) as negative value. Round your answer to the nearest cent.

$____________

b. What is the break-even point (unit sales)? Round your answer to the nearest whole number.

_________units

c. What would happen to the break-even point if the selling price was raised to $34?

-Select

-The result is that the break-even point is lower.

The result is that the break-even point is higher.

The result is that the break-even point remains unchanged.

What would happen to the break-even point if the selling price was raised to $34 but variable costs rose to $24 a unit? Round your answer to the nearest whole number.

-Select

-The result is that the break-even point increases.

The result is that the break-even point decreases.

The result is that the break-even point remains unchanged.

5.The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $10 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $5.3 million with a 0.2 probability, $3.2 million with a 0.5 probability, and $0.7 million with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places at the end of the calculations.

Debt/Capital ratio is 0.

RE =_________%

=________%

CV =__________

Debt/Capital ratio is 10%, interest rate is 9%.

RE =_________%

=________%

CV =________

Debt/Capital ratio is 50%, interest rate is 11%.

RE =________%

=_______%

CV =________

Debt/Capital ratio is 60%, interest rate is 14%.

RE =_____%

=_______%

CV =________