Doug Robinson Is Considering the Possibility of Opening His Own

question 67

Essay

Doug Robinson is considering the possibility of opening his own manufacturing facility. He expects first-year sales to be $800,000, and he feels that his variable costs will be approximately 40% of sales. His fixed costs in the first year will be $200,000.
Doug is considering two ways of financing the firm: (a) 40% equity financing and 60% debt at 10%, or (b) 100% equity financing. He can sell common stock to his relatives for $10 per share. Either way, he will need to raise $1,000,000.
-Compute his break-even point in dollars.

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Definitions:

Desmosomes

Cell structures specialized for cell-to-cell adhesion, serving as anchoring junctions in areas of mechanical stress, such as skin and cardiac muscle.

Vascular Tissue

Plant tissue responsible for transporting water, nutrients, and sugars between different parts of the plant.

Circulatory System

The body's system responsible for the transport of blood, nutrients, waste products, and other substances, consisting of the heart, blood vessels, and blood.

Algae

A diverse group of photosynthetic organisms, mostly aquatic, that include seaweeds and many single-celled forms, contributing significantly to oxygen production and biogeochemical cycles.