. Calculate the degree of operating leverage for the firm. (2 marks). Please round your final answer...
Question:
. Calculate the degree of operating leverage for the firm. (2 marks). Please round your final answer to 2 decimals.
b. Calculate the degree of financial leverage for the firm. (2 marks). Please round your final answer to 2 decimals.
c. Calculate the degree of combined leverage for the firm. (2 marks). Please round your final answer to 2 decimals.
d. If the company can increase their sales by 25%, what percentage increase in EBIT would you expect to observe? (2 marks)
e. If the company can increase their sales by 25%, what percentage increase in EPS would you expect to observe? (2 marks)
f. If the sales increase by 25%, what will the new EPS be? (2 marks)
g. If the company's sales decrease by 25%, what will the new EPS be? (2 marks)
h. If EBIT increases by 5%, what will the new EPS be? (2 marks)
i. If the company were to reduce its reliance on debt financing such that interest expense were
cut in half, how would this affect your answer to part (d)? (ii) part (e)? (4 marks)
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer