Question: Suppose Firm B's operating income is expected to decrease by as much as 17 percent in the next period? What will be the estimated level

Suppose Firm B's operating income is expected to decrease by as much as 17 percent in the next period?

What will be the estimated level of Firm B's net income based on this change?

Revenues Less: Variable cost Contribution margin Less: Fixed cost EBIT Less: Interest

Revenues Less: Variable cost Contribution margin Less: Fixed cost EBIT Less: Interest charges EBT Less: Taxes (40%) Earnings after tax Dividends (25%) Addition to retained earnings Firm A 850,000 125,000 725,000 120,000 605,000 75,000 530,000 212,000 318,000 79,500 238,500 Firm B 25,000,000 11,000,000 14,000,000 2,100,000 11,900,000 720,000 11,180,000 4,472,000 6,708,000 1,677,000 5,031,000

Step by Step Solution

★★★★★

3.42 Rating (155 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Firms B net income now is 50... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...

In a month when it sold 200 units of product, Queen Manufacturing Company (QMC) produced the following internal income statement: .:. QMC has the opportunity to alter its operations in one of the...

The results of operations for the Garret Bug Spray Manufacturing Company for the fourth quarter of 2017 were as follows (in thousands): Garret uses the variable costing method. Thus, only variable...

Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency Real) for last month is given...

The Transamerica Transportation Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes, Taxis, and Limos. Segment performance is measured...

Use the same transaction data for Magnificant Modems, Inc., as was used in Chapter 1. Required a. Use the following partially completed form to prepare an income statement using the contribution...

The Pletcher Transportation Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes, Taxis, and Limos. Segment performance is measured using...

Marple Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two officesone in Houston and one in Dallas. The firm...

This year Calypso Company sold 60,000 units of its only product for $20 per unit. Manufacturing and selling the product required $97,500 of fixed manufacturing costs and $157,500 of fixed selling and...

The Trenshaw Transportation Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes, Taxis, and Limos. Segment performance is measured using...

What is the role of random numbers in a Monte Carlo simulation?

Create a program that takes a word and transforms it to Pig Latin using String methods. You may need the word's length, a substring that does not include the first letter, and a substring that is...

Question 2 5 ( 3 points ) 2 : Laurie, your staff auditor, was assigned to plan the tests of the client's bank account reconciliation: Balance per Bank Deposits in Transit - Outstanding Checks =...

Evaluate (py+uo p2+o2 (py+uo (p2y2+c p2+o2 1 ds exp 2 2. p2+o2

What is Ansoff Matrix of Boohoo. Please Reference.

You sell (go short) 10 gold futures contracts at $400 per ounce, where the contract size is 100 ounces. At contract maturity, gold is selling for $410 per ounce. What is your profit (+) or loss (-)...

Inclusion in Property, Plant, and Equipment Guthrie Inc. Must determine whether the following items are included in property, plant, and equipment: a. Idle equipment awaiting sale b. Machinery kept...

Jason R. and Jenni L. Dane are married and live at 13071 Sterling Drive, Marquette, MI 49866. Jason is a self-employed insurance claims adjuster (business activity code 524290), and Jenni is the...

Question 4(1 point)Problem 3) A retailer has 50 Days-of-Supply of cereal boxes in inventory.On average, how many days does the retailer have a box of cereal before it is sold?25500505

4. The Cournot Model of Imperfect Competition: Suppose there are two firms, Firm A and Firm B, in a market, selling an identical good. These firms choose a profit-maximizing level of output to...

Differentiated Bertrand competition with two symmetric firms - Suppose there are two firms active in the marketFirm A and Firm Band they compete on price. Demand for each Firm i (where i is either A...

5) (20 points) (Diversion/Com petition) In an effort to improve its financial performance, Firm A has been collecting response (demand) data for its product over 48 consecutive weeks. Additionally,...

A start-up begins operations in 2012 by investing $400 million in plant and equipment. It expects to increase investment by $40 million each year, indefinitely, depreciating it straight-line over two...

A start-up begins operations in 2009 by investing $400 million in plant and equipment. It expects to increase investment by $40 million each year, indefinitely, depreciating it straight-line over two...

Would like your help. Need help with study guides. Thanks. FINANCIAL AND MANAGERIAL ACCOUNTING - Fifth Edition E22-32 Requirements 1. Prepare a budgeted income statement with columns for 1,300 units,...