Capital Structure and Leverage 21. Texas Industries estimates that its fixed operating costs are $1,000,000, and its variable costs are $6.00 per unit sold. Each unit produced sells for $8.00. What is the companyâ€™s unit sales breakeven point? a. 125,000 units b. 166,667 units c. 250,000 units d. 500,000 units 22. Texas Products Inc. has a division that makes plastic composite bags for the space industry. The division has fixed costs of $45,000 per month, and it expects to sell 45,000 bags per month. If the variable cost per bag is $6.00, what price must the division charge in order to break even? a. $6.00 b. $7.00 c. $8.00 d. $9.00 23. Smith Boating is trying to determine its optimal capital structure. The companyâ€™s CFO believes the optimal debt ratio is somewhere between 20 and 50%. Her staff has developed the following projections for the companyâ€™s EPS and stock price for various debt levels. Assuming that the firm uses only debt and common equity, what is Smithâ€™s optimal capital structure? Debt Ratio Projected EPS Projected Stock Price 20% $4.35 $44.32 30% $4.85 $46.23 40% $5.55 $46.01 50% $5.95 $44.55 a. 20% debt ratio b. 30% debt ratio c. 40% debt ratio d. 50% debt ratio 24. Jacob Industries is trying to determine its optimal capital structure. The companyâ€™s CFO believes the optimal debt ratio is somewhere between 30 and 60%. His staff has developed the following projections for the companyâ€™s EPS and stock price for various debt levels. Assuming that the firm uses only debt and common equity, at what debt ratio is the companyâ€™s WACC minimized? Debt Ratio Projected EPS Projected Stock Price 30% $5.35 $54.32 40% $6.85 $56.23 50% $7.55 $57.01 60% $7.95 $55.55 a. 30% debt ratio b. 40% debt ratio c. 50% debt ratio d. 60% debt ratio 25. Chip Motors has $20 million in assets, which are financed with $4 million of debt and $16 million of equity. If Chipâ€™s beta is currently 2.4 and its tax rate is 40 percent, what is its unlevered beta? a. 1.503 b. 1.934 c. 2.087 d. 2.400 Business Assignment Help, Business Homework help, Business Study Help, Business Course Help
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