Question 2. Break-even quantity
Use the information on the table below to find the break-even quantity for a company that cultivates abalone for sale to local restaurants. Assume the company has a discount rate of 15%, and that the project has an initial investment of $840,000. Further assume that the equipment is depreciated using straight-line over the project’s 7 year life.

Sales price per abalone       $35
Variable cost per abalone    $6.10
Annual Fixed Costs                $375,000
Tax Rate                               .35

Question 3.
You have been hired to estimate the beta for HP and have broken the company down into 4 broad business groups. The market values and equity betas for each group are shown on the table below:
                              Division‘s equity                                           Market Value
Business Group       Market Value             Asset Beta             Division Debt
                              (in $billions)                                                 (in $billions)

Mainframes                   $2.0                         1.10                         $0.75
Personal Computers    $2.0                         1.50                         $0.50
Software                      $1.0                         2.00                         $1.00
Printers                         $3.0                         1.00                         $1.25

(a) Estimate the equity beta for HP as a company.
(b) If the market risk premium is 5% and the T-Bond rate is 2%, determine how much of the return HP’s shareholders’ earn is due to business (asset) risk, and how much is due to financial risk.
(c) Compute HP’s WACC

Question 2. Break-even quantity Use the information on the table...