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4. A review of the degree of operating leverage (DOL) It is December 31. Last year, Praxis Corporation had sales of $16,000,000, and it forecasts that next year's sales will be $17,600,000. Its fixed costs have been and are expected to continue to be $2,000,000, and its variable cost ratio is 40.00%. Praxis's capital structure consists of a $13.5 million bank loan, on which it pays an interest rate of 6%, and 300,000 shares of common equity. The company's profits are taxed at a marginal rate of 35%. Given this data, complete the following sentences: The percentage change in the company's sales is • The percentage change in EBIT is The degree of operating leverage (DOL) at $17,600,000 is

4. A review of the degree of operating leverage (DOL) It is December 31. Last year, Praxis Corporation had sales of $16,000,000, and it forecasts that next year's sales will be $17,600,000. Its fixed costs have been and are expected to continue to be $2,000,000, and its variable cost ratio is 40.00%. Praxis's capital structure consists of a $13.5 million bank loan, on which it pays an interest rate of 6%, and 300,000 shares of common equity. The company's profits are taxed at a marginal rate of 35%. Given this data, complete the following sentences: The percentage change in the company's sales is • The percentage change in EBIT is The degree of operating leverage (DOL) at $17,600,000 is

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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4. A review of the degree of operating leverage (DOL) It is December 31. Last year, Praxis Corporation had sales of $16,000,000, and it forecasts that next year's sales will be $17,600,000. Its fixed costs have been and are expected to continue to be $2,000,000, and its variable cost ratio is 40.00%. Praxis's capital structure consists of a $13.5 million bank loan, on which it pays an interest rate of 6%, and 300,000 shares of common equity. The company's profits are taxed at a marginal rate of 35%. Given this data, complete the following sentences: • The percentage change in the company's sales is . The percentage change in EBIT is The degree of operating leverage (DOL) at $17,600,000 is There are several ways to use and interpret a firm's DOL value. Consider the following statement and indicate whether it accurately reflects the meaning or an appropriate use of a firm's DOL value. Activities that change the distribution of a firm's fixed and variable cost structures, such as outsourcing, will affect a firm's DOL True or False: This statement accurately describes a firm's DOL True False
Transcribed Image Text:4. A review of the degree of operating leverage (DOL) It is December 31. Last year, Praxis Corporation had sales of $16,000,000, and it forecasts that next year's sales will be $17,600,000. Its fixed costs have been and are expected to continue to be $2,000,000, and its variable cost ratio is 40.00%. Praxis's capital structure consists of a $13.5 million bank loan, on which it pays an interest rate of 6%, and 300,000 shares of common equity. The company's profits are taxed at a marginal rate of 35%. Given this data, complete the following sentences: • The percentage change in the company's sales is . The percentage change in EBIT is The degree of operating leverage (DOL) at $17,600,000 is There are several ways to use and interpret a firm's DOL value. Consider the following statement and indicate whether it accurately reflects the meaning or an appropriate use of a firm's DOL value. Activities that change the distribution of a firm's fixed and variable cost structures, such as outsourcing, will affect a firm's DOL True or False: This statement accurately describes a firm's DOL True False
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