Integrative Multiple leverage measures Play-More Toys produces inflatable beach balls, selling 390,000 balls per year. Each...
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Integrative Multiple leverage measures Play-More Toys produces inflatable beach balls, selling 390,000 balls per year. Each ball produced has a variable operating cost of $0.89 and sells for $1.13. Fixed operating costs are $35,000. The firm has annual interest charges of $6,500, preferred dividends of $1,800, and a 27% tax rate a. Calculate the operating breakeven point in units. b. Use the degree of operating leverage (DOL) formula to calculate DOL c. Use the degree of financial leverage (DFL) formula to calculate DFL d. Use the degree of total leverage (DTL) formula to calculate DTL Compare this to the product of DOL and DFL calculated in parts (b) and (c). Integrative Multiple leverage measures Play-More Toys produces inflatable beach balls, selling 390,000 balls per year. Each ball produced has a variable operating cost of $0.89 and sells for $1.13. Fixed operating costs are $35,000. The firm has annual interest charges of $6,500, preferred dividends of $1,800, and a 27% tax rate a. Calculate the operating breakeven point in units. b. Use the degree of operating leverage (DOL) formula to calculate DOL c. Use the degree of financial leverage (DFL) formula to calculate DFL d. Use the degree of total leverage (DTL) formula to calculate DTL Compare this to the product of DOL and DFL calculated in parts (b) and (c).
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To calculate the operating breakeven point in units we need to determine the quantity of beach balls ... View the full answer
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Posted Date:
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