Outflung Computers has $1000 in revenue this year, along with COGS of $400 and SG&A of $100.
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Question:
Outflung Computers has $1000 in revenue this year, along with COGS of $400 and SG&A of $100. The required rate of return on its equity is 14%, and the risk-free rate is 5%. Assume that the COGS only includes the marginal costs of selling a computer. Banana is considering adding $700 worth of debt with a coupon rate of 5% and a YTM of 7.9% to its capital structure.
M&M Proposition 2:
What per cent of the company\\\'s costs are fixed, and what per cent are variable with the debt and without the change in leverage?
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