For the Year Ended December 31, 20X1 Sales (23,000 tires at $66 each) Variable costs (23,000 tires at $33) Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (30%) Earnings after taxes (EAT) a. Compute the degree of operating leverage. Note: Round your answer to 2 decimal places. Degree of operating leverage b. Compute the degree of financial leverage. Note: Round your answer to 2 decimal places. _ Degree of financial leverage c. Compute the degree of combined leverage. Note: Round your answer to 2 decimal places. Degree of combined leverage $ 1,518,000 759,000 430,000 $ 329,000 51,500 $ 277,500 83,250 $ 194,250
For the Year Ended December 31, 20X1 Sales (23,000 tires at $66 each) Variable costs (23,000 tires at $33) Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (30%) Earnings after taxes (EAT) a. Compute the degree of operating leverage. Note: Round your answer to 2 decimal places. Degree of operating leverage b. Compute the degree of financial leverage. Note: Round your answer to 2 decimal places. _ Degree of financial leverage c. Compute the degree of combined leverage. Note: Round your answer to 2 decimal places. Degree of combined leverage $ 1,518,000 759,000 430,000 $ 329,000 51,500 $ 277,500 83,250 $ 194,250
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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Transcribed Image Text:For the Year Ended December 31, 20X1
Sales (23,000 tires at $66 each)
Variable costs (23,000 tires at $33)
Fixed costs
Earnings before interest and taxes (EBIT)
Interest expense
Earnings before taxes (EBT)
Income tax expense (30%)
Earnings after taxes (EAT)
a. Compute the degree of operating leverage.
Note: Round your answer to 2 decimal places.
Degree of operating leverage
b. Compute the degree of financial leverage.
Note: Round your answer to 2 decimal places.
Degree of financial leverage
...............
c. Compute the degree of combined leverage.
Note: Round your answer to 2 decimal places.
Degree of combined leverage
d. Compute the break-even point in units.
$ 1,518,000
759,000
430,000
$ 329,000
51,500
$ 277,500
83,250
$ 194,250
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Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (30%) Earnings after taxes (EAT)
a. Compute the degree of operating leverage. Note: Round your answer to 2 decimal places. Degree of operating leverage
b. Compute the degree of financial leverage. Note: Round your answer to 2 decimal places. Degree of financial leverage ...............
c. Compute the degree of combined leverage. Note: Round your answer to 2 decimal places. Degree of combined leverage
Sub Part to be sovled is d. Compute the break-even point in units.
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