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3/In January of year 0, the Swiss group Schmidheiny published the following projected figures: 0 1 2 3 Production Raw materials used Personnel cost Taxes Other external services Outsourcing Depreciation and amortisation 70.2 29.4 22.2 0.5 13.7 2.5 1.4 106 35.4 29.4 0.7 19.8 8.9 2.7 132 44.3 36.7 0.7 24.6 11.2 3.6 161 53.8 41.1 0.8 30.5 11.3 5 o o (a) Calculate the breakeven point for each year. The cost structure is as follows: variable costs: raw materials used, outsourcing, 50% of other external services; fixed costs: all other costs. (b) Schmidheiny is planning a capital expenditure programme which should increase its production capacity threefold. This programme, which is spread over years 0 to 1, includes the construction of four factories and the launch of new products. The income statements for years 1, 2 and 3 factor in these investments. State your views. (c) The company will need to raise around 30m to finance this capital expenditure programme. Financial expense before this capital expenditure programme amounts Chapter 10 MARGIN ANALYSIS: RISKS 179 to 1.6m, and Schmidheiny is planning to finance its new requirements using debt exclusively (average interest rate: 10% before tax). What is your view of the debt policy the company intends to pursue

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