Howell Enterprises Is Forecasting EPS of $4

question 101

Multiple Choice

Howell Enterprises is forecasting EPS of $4.00 per share for next year.The firm has 10,000 shares outstanding,it pays 12 percent interest on its debt,and it faces a 40 percent marginal tax rate.Its estimated fixed costs are $80,000 while its variable costs are estimated at 40 percent of revenue.The firm's target capital structure is 40 percent equity and 60 percent debt and it has total assets of $400,000.On what level of sales is Howell basing its EPS forecast?

• A) $1,000,000
• B) $480,400
• C) $316,722
• D) $292,445
• E) $105,280

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Definitions:

Goods

Items that are produced for sale or use, often tangible commodities.

Intermittent Process

A production process characterized by irregular or non-continuous production runs, often used for custom jobs or products with variable demand.

Job Shop

A manufacturing operation that produces small batches of customized products, each requiring a unique set-up and workflow.

Repetitive Process

A manufacturing process in which the same product or service is produced in a sequence of steps repeatedly.