WEEK 4 FINC

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finc600homeworktemplateweek4jan2013.xlsx
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Instructions

Instructions
NAME:
To complete the homework assignments in the templates provided:
1. The question is provided for each problem. You may need to refer to your textbook for additional information in a few cases.
2. You will enter the required information into the shaded cells.
3. The cells are coded:
a) T requires a text answer. Essay questions require references; use the textbook.
b) C requires a calculation, using Excel formulas or functions. You cannot perform the operation on a calculator and then type the answer in the cell. You will enter the calculation in the cell, and only the final answer will show in the cell. I will be able to review your calculation and correct, if necessary.
c) F requires a number only. In some problems, a “Step 1” is added to help you solve the problem.
d) Formula requires a written formula, not the numbers. For example, the rate of return = [(1 + nominal)/ (1+inflation)]-1, or D (debt) + E (equity) = V (value).
4. Name your assignment file as "lastnamefirstinitial-FINC600-Week#", and submit by midnight ET, Day 7.

P10-14

Problem 10-14
Suppose that the expected variable costs of Otobai’s project are ¥33 billion a year and that fixed costs are zero. a. How does this change the degree of operating leverage (DOL)? b. Now recompute the operating leverage assuming that the entire ¥33 billion of costs are fixed.
Answers:
See page 243, Table 10.1, of textbook for additional information. Copy is also provided below.
DOL Formula Fixed Costs Calculation
a. 1+(Fixed cost + depreciation)/ operating profit F C
b. 1+(Fixed cost + depreciation)/ operating profit F C

Instructions: Please refer to your book for assistance with your homework. Post your work in the worksheet. Highlight your final answer.

Principles of Corporate Finance, Concise, 2nd Edition