OceanGate sells external hard drives for $288 each. Its total fixed costs are $45 million, and...

60.1K

Verified Solution

Question

Finance

OceanGate sells external hard drives for $288 each. Its totalfixed costs are $45 million, and its variable costs per unit are$173. The corporate tax rate is 41%. If the economy is strong, thefirm will sell 2 million drives, but if there is a recession, itwill sell only half as many.
a. What will be the percentage decline in salesif the economy enters a recession? (Negative value shouldbe indicated by a minus sign. Round your answer to2 decimal places.)
b. What will be the percentage decline inprofits if the economy enters a recession? (Negative valueshould be indicated by a minus sign. Round your answer to 2 decimalplaces.)
c. Calculate the operating leverage of thisfirm? (Round your answer to 2 decimal places.)

Answer & Explanation Solved by verified expert

4.2 Ratings (752 Votes)

a Sale Price per unit 288 Units sold in strong economy 2 million Units sold in recession Units sold in strong economy 2 2million 2 1 million Sales in strong economy Units sold in strong economy x sale price per unit 2million x 288 576 million Sales in recession Units sold in recession x sale price per See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

OceanGate sells external hard drives for $288 each. Its totalfixed costs are $45 million, and its variable costs per unit are$173. The corporate tax rate is 41%. If the economy is strong, thefirm will sell 2 million drives, but if there is a recession, itwill sell only half as many.a. What will be the percentage decline in salesif the economy enters a recession? (Negative value shouldbe indicated by a minus sign. Round your answer to2 decimal places.)b. What will be the percentage decline inprofits if the economy enters a recession? (Negative valueshould be indicated by a minus sign. Round your answer to 2 decimalplaces.)c. Calculate the operating leverage of thisfirm? (Round your answer to 2 decimal places.)