Veggies and Fruits Corner Inc. sells 30-pound bags of oranges to The Veterans Home facility for $12 per bag.The fixed costs of this operation are $45,000, while the variable costs of 0ranges are $4 per bag. Veggies and Fruits Corner Inc. has an annual interest expense of $50,000. (a)Calculate the degree of financial leverge (DFL) at 25,000 bags sold. (b) Explain the concept of financial leverage. What are the advantages and disadvantages?

Answer rating: 100% (QA)

To calculate the degree of financial leverage DFL we need to use the following formula DFL EBIT Interest Expense EBIT Interest Expense Fixed Costs Var... View the full answer