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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Fundamentals of corporate finance

ISBN: 978-0073382395

9th edition

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan

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Question Posted: Jun 17, 2023 02:37 AM

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Show that if we consider the effect of taxes, the degree of operating leverage can be written

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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

Fundamentals of corporate finance

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