Please keep at least 2 decimal points for dollar amounts and at least 4 significant digits for rates.

Question 2 ABC Inc. is a startup that manufactures an innovative product. The unit price is expected to be $150. If it uses a semi-automated manufacturing process, the variable cost per unit is $70 and annual fixed cost is $90,000. If it uses a fully automated manufacturing process, the variable cost per unit is $30 and annual fixed cost is $180,000.

a) Calculate the breakeven quantity of the two manufacturing processes (the sales quantity that they have the same EBIT).

b) Calculate the EBIT and DOL of the two methods at the breakeven quantity in part a. ABC also needs to decide its capital structure. Currently, it has $135,000 perpetual debts which pay annual coupon of 8%. It also has 12,000 common shares outstanding. ABC is considering borrowing additional $45,000 debt to buy back 2,000 common shares. The tax rate is 30%.

c) If ABC chooses semi-automation, calculate the breakeven quantity of the current and proposed capital structures (the sales quantity that they have the same EPS).

d) Calculate the EBIT, EPS, DOL, DFL, and DTL of the two capital structures at the breakeven quantity in part c.

e) If ABC chooses full automation, calculate the breakeven quantity of the current and proposed capital structures (the sales quantity that they have the same EPS).

f) Calculate the EBIT, EPS, DOL, DFL, and DTL of the two capital structures at the breakeven quantity in part e.