Question: Financial leverage Max Small has outstanding school loans that require a monthly payment of $1,090. He needs to buy a new car for work and
Financial leverage Max Small has outstanding school loans that require a monthly payment of $1,090. He needs to buy a new car for work and estimates that this purchase will add $355 per month to his existing monthly obligations. Max will have $2,990 available after meeting all of his monthly living (operating) expenses. This amount could vary by plus or minus 10%. a. To assess the potential impact of the additional borrowing on his financial leverage, calculate the DFL in tabular form for both the currer and proposed loan payments using Max's available $2,990 as a base and a 10% change. b. Can Max afford the additional loan payment? c. Should Max take on the additional loan payment
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