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?

 

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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 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

Answer rating: 100% (QA)

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