# accounting

**neel**

1. Firm A has $10,000 in assets entirely financed

with equity. Firm B also has $10,000 in assets, but these assets are financed

by $5,000 in debt (with a 10 percent rate of interest) and $5,000 in

equity. Both firms sell 10,000 units of output at $2.50 per unit. The

variable costs of production are $1, and fixed production costs are $12,000. (To

ease the calculation, assume no income tax.)

a. What is the operating income (*EBIT*) for

both firms?

b. What are the earnings after interest?

c. If sales increase by 10 percent to 11,000 units, by what percentage will each firmâ€™s earnings after interest increase? To answer the question, determine the earnings after taxes and compute the

percentage increase in these earnings from the answers you derived in part *b*.

d. Why are the percentage changes different?

- 9 years ago

**answers 100% correct from a CPA**

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- acc_1.xlsx

### calculations

Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 in â€¦

8 years ago### finance

1. Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 in â€¦

7 years ago### FIN 370 Week 5 chapter 20 problem 1

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9 years ago### FIN 370 WEEK 5 Individual Assignment (Firm A & B)

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8 years ago### EBIT and Earnings after interest

NOT RATEDFirm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 in â€¦

8 years ago### Firm A has $10,000 in assets entirely financed with equity

NOT RATED1. Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 â€¦

8 years ago### FIN 370 â€“Individual Assignment Week Five

NOT RATED1

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NOT RATED**1. Firm A has $10,000 in assets entirely financed**

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â€¦8 years ago### Firm A and B

NOT RATED1. Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 â€¦

8 years ago### questions

NOT RATED

has $10,000 in assets, but these assets are financed by $5,000 in debt

(with a 10 percent rate of interest) and $5,000 in â€¦6 years ago