# George wants to know how many boxes of chocolate bars he needs to sell for $25.00 to break even.... ## Question: 1. George wants to know how many boxes of chocolate bars he needs to sell for$25.00 to break even. He estimates fixed operating costs of $12,500 per year and variable operating costs of$15 per box.

How many boxes must he sell to break even on operating costs?

2. George incorporates, issues 1,000 shares of common stock and declares dividends of $2 per share for the first year. He estimates his growth rate at 3% and required return is 5%. How much is his company worth? 3. The Board of Directors of George's corporation declares a dividend to shareholders of record on Thursday April 30, 2015. When is the last day you can purchase stock in George's corporation and still receive the dividend? ## Break-Even Analysis: The break-even point (BEP) is the point where a company earns no profit and incurs no loss; it's calculated as: BEP = Fixed cost / Contribution Per Unit. A company's worth is the total value of the organization on a given date; it's usually computed by multiplying the outstanding shares by the market price of the stock. ## Answer and Explanation: 1 Part 1 • Break even point in units = Fixed cost / Contribution per unit • Contribution per unit = Selling price - variable cost • Contribution per unit =$25 - $15 =$10
• Given fixed costs = $12,500 • Break even point (units) =$12,500 / $10 = 1,250 units Hence, George is required to sell 1,250 units in order to break even. Part 2 Here we need to compute the value/price of the stock first. Stock Value = Dividends per share (DPS) / (Required return - Growth rate) Stock Value =$2 / (5% - 3%) = $100 Company's worth = 1,000 shares *$100 per share = \$100,000

Part 3

In order to qualify for a dividend receipt, one should buy the stock three days before the record date, which is April 27, 2015, as April 30, 2015, is the record date. 