Show that if we consider the effect of taxes, the degree of operating leverage can be written
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Show that if we consider the effect of taxes, the degree of operating leverage can be written as:
DOL = 1 + [FC × (1 − T ) − T × D ]/OCF
Notice that this reduces to our previous result if T = 0. Can you interpret this in words?
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To interpret the equation lets break it down DOL represents the degree of operating leverage FC stan...View the full answer
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Related Book For
Fundamentals of corporate finance
ISBN: 978-0073382395
9th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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