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What is the degree of operating leverage under the worst-case scenario?

What is the degree of operating leverage under the worst-case scenario?

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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Magellen Industries is analyzing a new project. The data they have gathered to date is as follows: Sales quantity Sales price per unit Variable cost per unit Fixed cost Multiple Choice J Initial requirement for equipment: $120,000 Depreciation: Straight-line to zero over the four-year life of the project with no salvage value. Required rate of return: 15% Marginal tax rate: 35% .93 What is the degree of operating leverage under the worst-case scenario? 1.07 1.93 Lower Bound 2.07 9500 $9.75 $4.80 $15,000.00 1.63 Expected Value 10000 $10.00 $5.20 $18,000.00 Upper Bound 10500 $10.25 $5.60 $21,000.00
Transcribed Image Text:Magellen Industries is analyzing a new project. The data they have gathered to date is as follows: Sales quantity Sales price per unit Variable cost per unit Fixed cost Multiple Choice J Initial requirement for equipment: $120,000 Depreciation: Straight-line to zero over the four-year life of the project with no salvage value. Required rate of return: 15% Marginal tax rate: 35% .93 What is the degree of operating leverage under the worst-case scenario? 1.07 1.93 Lower Bound 2.07 9500 $9.75 $4.80 $15,000.00 1.63 Expected Value 10000 $10.00 $5.20 $18,000.00 Upper Bound 10500 $10.25 $5.60 $21,000.00
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