Kiwi Airlines has fixed operating costs of $5.8 million, and its variable costs amount to 20...
Kiwi Airlines has fixed operating costs of $5.8 million, and its variable costs amount to 20 percent of sales revenue. The firm has $2 million in bonds outstanding with a coupon interest rate of 8 percent. Revenues for the firm are $8 million and the firm is in the 40 percent corporate income tax bracket. What is the firm's breakeven dollar sales volume? Group of answer choices $5.8 million $4.83 million $7.25 million $9.67 million $29 million
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Homework Answers
Given,
Fixed operating costs = $5.8 million
Variable costs rate = 20% or 0.20
Solution :-
Firm's break even sales volume
= Fixed operating costs/(1 - Variable cost rate)
= $5.8 million/(1 - 0.20)
= $5.8 million/0.80
= $7.25 million
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