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 combined leverage is a. 2.1x b. 1.9x c. 2.9x d. 2.0x

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
icon
Related questions
Question
100%

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 combined leverage is

a. 2.1x

b. 1.9x

c. 2.9x

d. 2.0x

 

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Forecasting Financial Statement
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education