Adams K. Smith has written and self-published a book on engineering Economics. H

Question

Adams K. Smith has written and self-published a book on engineering Economics. He needs to know the number of books he must sell to breakeven. The books will sell for $195 each. Smith estimates his variable cost per book are $45 and his annual fixed operating costs associated with producing the book are $30,000. Answer the following questions: How many books must Smith sell to breakeven? Calculate Smith's total revenue at the breakeven number of books sold. Calculate Smith's total cost at the breakeven number of books sold, How many books must Smith sell if he wants to earn a profit of $45,000 before taxes based solely on sales from the Engineering Economics book? Hawk Global Engineering, Inc. has outstanding a $1,000 par-value bond with a 9.00% coupon interest rate. The bond has five years remaining to its maturity date. If interest is paid annually, find the value of the bond when: the required return is 8.00%. the required return is 9.00%. the required return is 10.00%.

Explanation / Answer

26

Answer

Breakeven=TR-TC or TR=TC
TR=P*Q and TC=Fixed cost+Variable Cost*Quantity

Q*195=30000+Q*45
Q=30000/150=200
TR=QP=200*195=$39000
TC=30000+200*45=39000

Profit of 45000

TR-TC=45000
Q*195-30000-45*Q=45000
Q=75000/150=500

He have to sell 500 books

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