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Sales (75,000units)                                                                      P 750,000                 Variable costs                                                                 225,000                 Contribution margin                                                    P 525, 000                 Fixed manufacturing costs                                              187,500                 Operating income                                                        P 337,000                 Interest                                                                                75,000                 Earnings before taxes                                                    P 262,500                 Taxes (at 31%)                                                                    81,375                 Net income                                                                   P 181,125                 Shares outstanding                                                            15,000 The degree of financial leverage is a. 1.29x b. 4.50x c. 3.50x d. 1.32

Sales (75,000units)                                                                      P 750,000                 Variable costs                                                                 225,000                 Contribution margin                                                    P 525, 000                 Fixed manufacturing costs                                              187,500                 Operating income                                                        P 337,000                 Interest                                                                                75,000                 Earnings before taxes                                                    P 262,500                 Taxes (at 31%)                                                                    81,375                 Net income                                                                   P 181,125                 Shares outstanding                                                            15,000 The degree of financial leverage is a. 1.29x b. 4.50x c. 3.50x d. 1.32

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
Problem 1PS
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Sales (75,000units)                                                                      P 750,000

                Variable costs                                                                 225,000

                Contribution margin                                                    P 525, 000

                Fixed manufacturing costs                                              187,500

                Operating income                                                        P 337,000

                Interest                                                                                75,000

                Earnings before taxes                                                    P 262,500

                Taxes (at 31%)                                                                    81,375

                Net income                                                                   P 181,125

                Shares outstanding                                                            15,000

The degree of financial leverage is

a. 1.29x

b. 4.50x

c. 3.50x

d. 1.32x

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