Business

Order Description Question 3 a) Two firms, ABC and XYZ, both produce widgets. The price of widgets is $1 each. Firm ABC has total fixed costs of $500,000 and variable costs of 50 cents per widget. Firm XYZ has total fixed costs of $240,000 and variable costs of 75 cents per widget. The corporate tax rate is 30%. If the economy is strong, each firm will sell 1,200,000 widgets. If the economy enters a recession, each firm will sell 1,100,000 widgets. i) Determin" rel="nofollow">ine the after-tax profit of Firm ABC and Firm XYZ if the economy enters a recession, and if the economy is strong. ii) Calculate Firm ABC and Firm XYZ's degree of operatin" rel="nofollow">ing leverage. (4 marks) b) To what extent do you thin" rel="nofollow">ink the in" rel="nofollow">industry life cycle is relevant to security analysts? Your response should discuss: i) The way in" rel="nofollow">in which the in" rel="nofollow">industry life cycle can be used by security analysts, and ii) The limitations of in" rel="nofollow">industry life cycle for security analysis.