Assignment 4-2

# Assignment 4-2 - PROBLEM 13-2 FLOTATION COSTS AND ISSUE...

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PROBLEM 13-2 FLOTATION COSTS AND ISSUE SIZE DATA Needs to raise \$10,000,000.00 Mrkt price \$120.00 Flotation Costs \$15.00 Net Price= \$95,238 This would not be a net p Dollar size = \$11,428,560.00 How many shares= 95,238

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price, but instead the number of shares.
Return on Operating Assets. M x 12 = 48% M = 4% Operating Assets x Operating Asset Turnover = Sales \$6,000,000 x 12 = Sales Sales = \$72,000,000 Sales [STEP 2] x Operating Profit Margin [STEP 1] = EBIT \$72,000,000 x 4% = EBIT EBIT = \$2,880,000 EBIT [STEP 3] x Degree of Operating Leverage = Revenue before Fixed Costs \$2,880,000 x 10 = Revenue before Fixed Costs Revenue before Fixed Costs = \$28,800,000 Sales [STEP 2] - Revenue before Fixed Costs [STEP 4] = Total Variable Costs \$72,000,000 - \$28,800,000 = Total Variable Costs Total Variable Costs = \$43,200,000 Revenue before Fixed Costs [STEP 4] - EBIT [STEP 3] = Fixed Costs \$28,800,000 - \$2,880,000 = Fixed Costs Fixed Costs = \$25,920,00 I have now graded all assignments for week 4. Many of you did a great job finding all t case # 2 from chapter 12. This was a major step in the process before you could answer

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## This note was uploaded on 09/15/2011 for the course BUSINESS BUS 401 taught by Professor Dawnmckinley during the Fall '10 term at Ashford University.

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Assignment 4-2 - PROBLEM 13-2 FLOTATION COSTS AND ISSUE...

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