Choose the correct letter of answer: Company B sells 500,000 bottles of soft drinks a year. Each bottle produced has variable cost of P0.25 and sells for P0.45. Fixed operating costs are P50,000.00. The company has current interest charges of P6,000.00 and preferred dividends of P2,400.00. The corporate tax rate is 40%. Calculate the degree of operating leverage and degree of financial leverage. a. 2 and 1.25 b. 2.5 and 1.5 c. 3 and 1.75 d. 2.5 and 2.0 e. 3 and 2.25

Choose the correct letter of answer: Company B sells 500,000 bottles of soft drinks a year. Each bottle produced has variable cost of P0.25 and sells for P0.45. Fixed operating costs are P50,000.00. The company has current interest charges of P6,000.00 and preferred dividends of P2,400.00. The corporate tax rate is 40%. Calculate the degree of operating leverage and degree of financial leverage. a. 2 and 1.25 b. 2.5 and 1.5 c. 3 and 1.75 d. 2.5 and 2.0 e. 3 and 2.25

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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LPM Corporation sells its product for $10 each. Fixed operating costs equal $100,000, and variable operating costs are 75 percent of the selling price. The firm pays $37,500 in interest, and its marginal tax rate is 35 percent. (a) What are LPM’s operating breakeven point and financial breakeven point? (b) If LPM expects to sell 65,000 units, what are its degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of total leverage (DTL)? The firm has no preferred stock
8. A juice bar is currently doing $292,000 a year in sales revenue. Juice cost is 40% and other variable cost is 25% of sales revenue. Fixed costs are $75,000. (a) Calculate annual operating income before tax. (b) The owner wants to increase the manager's salary by $6,000 a year. Find desired sales revenue and maintain the same level of operating income.
CoffeeStop primarily sells coffee. It recently introduced a premium coffee-flavored liquor (BF Liquors). Suppose the firm faces a tax rate of 25% and collects the following information. If it plans to finance 10% of the new liquor-focused division with debt and the rest with equity, what WACC should it use for its liquor division? Assume a cost of debt of 5.1%, a risk-free rate of 3.3%, and a market risk premium of 6.3%. % Equity % Debt 96% 4% CoffeeStop BF Liquors 90% 10% Note: Assume that the firm will always be able to utilize its full interest tax shield. Beta 0.62 0.25 The weighted average cost of capital is %. (Round to two decimal places.)
XYZ Company's single product has a selling price of $15 per unit. The fixed expenses were $110,000. This year the company reported a net operating income of $50,000. If sales are predicted to increase by 10% next year, how much would the increase in profits be in ($)? Select one: O a. No change in income O b. 7,273 О с. 16,000 O d. 5,000 О е. 6,000
Required information [The following information applies to the questions displayed below.] Henna Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 46,000 units of each product. Sales and costs for each product follow. Product 0 $ 800,400 160,080 640,320 512,320 128,000 44,800 Product T $ 800,400 640,320 Sales Variable costs Contribution margin 160,080 32,080 128,000 44,800 $ 83,200 Fixed costs Income before taxes Income taxes (35% rate) Net income $ 83, 200
Please Solve A and B
Sales of Blistre Autos are 400,000, variable cost is 230,000, fixed cost is 90,000 tax rate is 40%. Calculate the operating leverage of the company.A) 1.13 timesB) 3.54 times C) 1.35 timesD) 2.13 times
Alexander Corporation sells its only product for $30 per unit. Its variable costs per unit are 40% of its selling price. Its total fixed costs for the year are $450,000. The company has an average income tax rate of 40 %. How many units must the company sell in order to earn an after tax profit of $360,000 ? Question 12 options: 45,000. 58,334. 1, 750, 020. 75,000.
Callie Corporation’s products sell for $180 each. The variable cost of each product is $135, and fixed operating costs are $371,250. Callie pays $61,875 interest on its outstanding debt each year, and its marginal tax rate is 40 percent. If Callie expects to sell 11,000 units, what is its degree of operating leverage (DOL), its degree of financial leverage (DFL), and its degree of total leverage (DTL)? The firm has no preferred stock.
Consider the following income statement for Larry & Harry drug stores: Revenue - 90mm Variable costs- 48mm Interest on debt- 6mm Depreciation- 0 mm It’s tax rate is 25% and the book value of its equity is 150mm. What is L&H’s coverage ratio? A) 0.18 B) 5.25 C) 6 D) 7 E) 8 F)15
Please Solve E