Financial decison making

Problem1. A banquet operation, that can only do one banquet per day, has the following information:Sales Price $12.50, variable cost $5.85, daily fixed cost of $200.
What is the profit or loss if we accept a potential booking for 50 guests for a price of $9.00? 

Problem2. What is the profit or loss if we refuse the booking?

Problem3. The General Manager asks if this business facility should close for the off-season. . Assume next year will be the same as last year. The business was open 12 months last year. The off-season is 3 consecutive months, with sales of $30,000. Last year’s information was: sales $600,000, Variable costs 360,000, and fixed costs of 192,000. What was last year’s profit or loss?

Problem4. If they close for the off season, what would its annual profit or loss be?

Problem5. You must decide whether to take a fixed lease or variable lease for a business location. The fixed lease is $42,600 annually. The variable lease is based on 6% of sales. You expect annual sales to be a minimum of $800,000. Which type of lease should you select?

Problem6. Assuming you had picked a variable lease, how much would the payment have been on sales of $925,000?

Problem7. A capital budgeting analysis is required from the following information:

Old New 
Equipment Equipment
Purchase cost & installation 60,000
Salvage at end of useful life 0 0
Useful life 10 years
Depreciation method Straight-line
Annual operating expenses:
Payroll & related expense $45,000 $28,000
Power expense 7,500 5,700
Supplies expense 2,500 2,000
Repairs expense 2,000 300
Depreciation 0 ?

Total $57,000 $42,000
Income Tax Rate: 40%

The Rate of Return if the new equipment is purchased is:
(Do not use the Average Rate of return)

Problem8. Using the info from problem 7, calculate the Payback Period.

Problem9. What is one disadvantage of the payback method?

Problem10. We are considering purchasing one of two businesses.

Company ACompany B
Sales800,000800,000
VC480,000320,000
CM320,000480,000
FC220,000380,000
IBIT100,000100,000

Which operation would be the better buy and why? 

Problem11. The following is a partial section of a Balance Sheet of a company we are considering acquiring:

Accumulated
CostDepreciation
Land100,000
Building600,000250,000
Equipment200,00040,000

the depreciation method uses zero for salvage value. If we purchase the company by purchasing its common stock, calculate the allowable lifetime depreciation

Problem12. If however, instead of purchasing its common stock, we buy its assets by paying 150,000 for the land, 400,000 for the building, and 150,000 for the equipment. Calculate its allowable lifetime depreciation.