Question: Operating Leverage and Taxes shown that if we consider the effect of taxes, the degree of operating leverage can be written as: DOL = 1

Operating Leverage and Taxes shown that if we consider the effect of taxes, the degree of operating leverage can be written as: DOL = 1 + [FC x (1 – T) – T x D] / OCF. Notice that this reduces to our previous result if T = 0, can you interpret this in words?

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The DOL is expressed as DOL OCF Q DOL OCF 1 OCF 0 OCF 0 Q 1 Q 0 Q 0 The OCF for the initial ... View full answer

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