Delta projects sales of 100,000 units next year at an average price of $40 per unit. Variable costs are estimated at 70% of revenue, and fixed costs will be $1.2 million. BWP has $1 million in bonds outstanding on which it pays 8%, and its marginal tax rate is 40%. There are 100,000 shares of stock outstanding which trade at their book value of $30.

1. Compute Delta's contribution margin per unit, EAT, and EPS.
2. Calculate Delta's breakeven point in units and dollars
3. Calculate Delta's DOL, DFL and DTL.

Answer rating: 100% (QA)

To calculate Deltas contribution margin per unit EAT Earnings After Tax and EPS Earnings Per Share a... View the full answer