Given the following information for Computech, compute the firm’s degree of combined leverage (dollars are in thousands except EPS). Round your answer to one decimal place. Year 1 Year 2 Sales $550,000 $621,500 Fixed costs 110,000 110,000 Variable costs 200,000 226,000 Earnings before interest and taxes $240,000 $285,500 Interest 25,000 25,000 Earnings per share (EPS) $4.30 $5.21

Given the following information for Computech, compute the firm’s degree of combined leverage (dollars are in thousands except EPS). Round your answer to one decimal place. Year 1 Year 2 Sales $550,000 $621,500 Fixed costs 110,000 110,000 Variable costs 200,000 226,000 Earnings before interest and taxes $240,000 $285,500 Interest 25,000 25,000 Earnings per share (EPS) $4.30 $5.21

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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Red Company has a profit margin of 15 percent on sales of $20,000,000. If the firm has a debt of $7,500,000, total assets of $22,500,000, and an interest cost on a total debt of 5 percent, what is the firm's return on total assets (ROA)? (Round answer to two decimal places.)
Assume the Hiking Shoes division of the All About Shoes Corporation had the following results last year (in thousands). Management's target rate of return is 5% and the weighted average cost of capital is 25%. Its effective tax rate is 30%. $13,000,000 1,300,000 1,500,000 Sales Operating income Total assets Current liabilities 810,000 What is the division's sales margin? O A. 10.00% O B. 54.00% O C. 866.67% O D. 86.67%
6. A review of the degree of financial leverage (DFL) It is December 31. Last year, Water and Power Company (W&P) had sales of $80,000,000, and it forecasts that next year's sales will be $86,400,000. Its fixed costs have been-and are expected to continue to be-$44,000,000, and its variable cost ratio is 20.00%. W&P's capital structure consists of a $15 million bank loan, on which it pays an interest rate of 12%, and 5,000,000 shares of outstanding common equity. The company's profits are taxed at a marginal rate of 35%. The following are the two principal equations that can be used to calculate a firm's DFL value: DFL (at EBIT = $X): Given this information, complete the following sentences: Percentage Change in EPS Percentage Change in EBIT • The company's percentage change in EBIT is • The percentage change in W&P's earnings per share (EPS) is • The degree of financial leverage (DFL) at $86,400,000 is False DFL (at EBIT = $X): Consider the following statement about DFL, and indicate…
Consider the information in the following table. Using the DuPont formula, calculate the rate of return on investment. Income from operations $70,000 Invested assets 250,000 Sales 560,000
6. Given the following information for Computech, compute the firm's degree of combined leverage (dollars are in thousands except EPS): BASIC 2015 2016 Sales $ 500,000 $ 570,000 Fixed costs 120,000 120,000 Variable costs 300,000 342,000 Earnings before interest and taxes 80,000 108,000 Interest 30,000 30,000 Earnings per share (EPS) $ 1.00 $ 1.56
You are given the following information concerning a firm: Assets required for operation: $5,000,000 Revenues: $8,400,000 Operating expenses: $7,900,000 Income tax rate: 40%. Management faces three possible combinations of financing: 100% equity financing 30% debt financing with a 6% interest rate 60% debt financing with a 6% interest rate What is the implication of the use of financial leverage when interest rates change?
Assume the Hiking Shoes division of the Simply Shoes Company had the following results last year (in thousands). Management's target rate of return is 10% and the weighted average cost of capital is 30%. Its effective tax rate is 40%. Sales Operating income Total assets Current liabilities What is the division's Residual Income (RI)? OA. $100,000 O B. $4,400,000 Ⓒ C. $700,000 O D. $280,000 $11,000,000 1,100,000 4,000,000 780,000
(Using degree of operating leverage) Last year Baker-Huggy Inc. had fixed costs of $150,000 and net operating income of $34,000. If sales increase by 18 percent, by how much will the firm's NOI increase? What would happen to the firm's NOI if sales decreased by 21 percent? If sales increase by 18%, the change in the firms NOI will be (a decrease or increase) of _ %
Assume the hiking shoes division of the all about shoes corporation had the following results last year (in thousands). Managements target rate of return is 15% and the weighted average cost of capital is 25%, it's effective tax rate is 30%.
Calculation of individual costs and WACC: Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 35% long-term debt, 10% preferred stock, and 55% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 28%. debt The firm can sell for $1010 a 14-year, $1,000-par-value bond paying annual interest at a 7.00% coupon rate. A flotation cost of 2.5% of the par value is required. Preferred stock 7.00% (annual dividend) preferred stock having a par value of $100 can be sold for $88. An additional fee of$4 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $70 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.25 ten years ago to the $3.67 dividendpayment, D0, that…
Based on the following information, calculate the sustainable growth rate for Kaleb's Heavy Equipment: Profit margin Capital intensity ratio Debt-equity ratio Net income Dividends 8.1% .51 .67 $ 29,000 $19,720
You are given the following information on Kaleb's Heavy Equipment: Profit margin Capital intensity Debt-equity ratio Net income Dividends 18 $70,000 $ 15,200 Sustainable growth rate A Calculate the sustainable growth rate. (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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bartleby, a Learneo, Inc. business

	Year 1	Year 2
Sales	$550,000	$621,500
Fixed costs	110,000	110,000
Variable costs	200,000	226,000
Earnings before interest and taxes	$240,000	$285,500
Interest	25,000	25,000
Earnings per share (EPS)	$4.30	$5.21