A project has fixed costs of $1,000 per year, depreciation charges of $500 a year, revenue of
Question:
A project has fixed costs of $1,000 per year, depreciation charges of $500 a year, revenue of $6,000 a year, and variable costs equal to two-thirds of revenues.
a. If sales increase by 5%, what will be the increase in pretax profits?
b. What is the degree of operating leverage of this project?
c. Confirm that the percentage change in profits equals DOL times the percentage change in sales.
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a Pretax profits currently equal Revenue variable costs fixed costs depreci...View the full answer
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Related Book For 
Fundamentals Of Corporate Finance
ISBN: 9781259087585
6th Canadian Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan, Gordon Roberts
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