Break-even analysis 1.A company\'s fixed operating costs are $700,000, its varia
ID: 2768844 • Letter: B
Question
Break-even analysis
1.A company's fixed operating costs are $700,000, its variable costs are $2.15 per unit, and the product's sales price is $4.40. What is the company's breakeven point; that is, at what unit sales volume will its income equal its costs? Round your answer to the nearest whole.
-----------units.
Optimal capital structure
2. Jackson Trucking Company is in the process of setting its target capital structure. The CFO believes the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels:
Assuming that the firm uses only debt and common equity, what is Jackson's optimal capital structure? Round your answers to two decimal places.
--------% debt
---------% equity
At what debt ratio is the company's WACC minimized? Round your answer to two decimal places.
---------%
Risk analysis
Debt/Capital Ratio Projected EPS Projected Stock Price 20% $3.05 $34.75 30 3.45 37.50 40 3.80 36.00 50 3.50 34.00Explanation / Answer
1)
Breakeven point = Fixed costs/Contribution per unit
= $700,000÷(4.40-$2.15)
= 311,111 units