The following table summarizes the percentage changes in operating income, percentage changes in revenue, and betas for

Question:

The following table summarizes the percentage changes in operating income, percentage changes in revenue, and betas for four pharmaceutical firms.

a. Calculate the degree of operating leverage for each of these firms.

b. Use the operating leverage to explain why these firms have different betas.

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Applied Corporate Finance

ISBN: 978-1118808931

4th edition

Authors: Aswath Damodaran

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Question Posted: Apr 15, 2015 09:04 AM

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The following table summarizes the percentage changes in operating income, percentage changes in revenue, and betas for

Question:

% Change in % Change in Revenue Firm Operating Income Beta PharmaCorp SynerCorp BioMed Safemed 27 25 23 21 25 32 36 40 L00 1.15 1.30 1.40

Step by Step Answer:

a The degree of operating leverage is computed as Operating Income Revenue Firm Degree of Beta O...View the full answer

Applied Corporate Finance

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