Carolina Fastener, Inc

Subject:BusinessPrice: Bought3

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1. Carolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for $6.00. Each latch has variable operating costs of $3.50. Fixed operating costs are $4166.67 per month. The firm has a debt of $130,000 for which it pays 10% interest per annum and preferred stock of $170,000 of which it pays 10% dividend dividends per year. At this point, the firm is selling 30,000 latches a year and is taxed at 40%.

1. Calculate Carolina Fastener’s operating breakeven point.
2. On the basis of the firm’s current sales of 30,000 units per year and its interest and preferred dividend costs, calculate its EBIT and net profits.
3. Calculate the firm’s degree of operating leverage (DOL).
4. Calculate the firm’s degree of financial leverage (DFL).
5. Calculate the firm’s degree of total leverage (DTL).
6. Carolina Fastener has entered into a contract to produce and sell an additional 15,000 latches in the coming year. Use the DOL, DFL, and DTL to predict and calculate the changes in EBIT and net profit. Check your work by a simple calculation of Carolina Fastener’s EBIT and net profit, using the basic information given.

 

 

2. Briefly explain the concept of Stock split with example from any stock of Dhaka stock exchange.