McGee Corporation has fixed operating costs of $14 million and a variable cost ratio of 0.60. The firm has a $16 million, 8 percent bank loan and a $4 million, 13 percent bond issue outstanding. The firm has 0.8 million shares of $5 (dividend) preferred stock and 2.9 million shares of common stock ($1 par). McGee’s marginal tax rate is 40 percent. Sales are expected to be $120 million. Compute McGee’s degree of operating leverage at an $120 million sales level. Round your answer to two decimal places. Compute McGee’s degree of financial leverage at an $120 million sales level. Round your answer to two decimal places. If sales decline to $114 million, forecast McGee’s earnings per share. Round your answer to the nearest cent. $
McGee Corporation has fixed operating costs of $14 million and a variable cost ratio of 0.60. The firm has a $16 million, 8 percent bank loan and a $4 million, 13 percent bond issue outstanding. The firm has 0.8 million shares of $5 (dividend)
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Compute McGee’s degree of operating leverage at an $120 million sales level. Round your answer to two decimal places.
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Compute McGee’s degree of financial leverage at an $120 million sales level. Round your answer to two decimal places.
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If sales decline to $114 million,
forecast McGee’s earnings per share. Round your answer to the nearest cent.
$
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