The operating leverage.

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Answer 1

Question

Chapter 10, Problem 17PS

a)

Summary Introduction

To compute: The operating leverage.

b)

Summary Introduction

To show: This operating leverage is equal to one plus.

c)

Summary Introduction

To discuss: Whether the operating leverage is more or less if the sale is 200,000.

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Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes): Income Statement Balance Sheet Sales Costs $ 40,000 Assets 34,160 $26,000 Debt Equity $ 7,000 19,000 Net income $ 5,840 Total $26,000 Total $26,000 The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) Pro forma income statement Sales Costs $ 48000 40992 Assets $ 31200 Pro forma balance sheet Debt 7000 Equity 19000 Net income $ 7008 Total $ 31200 Total 30304 What is the external financing needed? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.) External financing needed $ 896

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Answer 2

Question

Chapter 10, Problem 17PS

a)

Summary Introduction

To compute: The operating leverage.

b)

Summary Introduction

To show: This operating leverage is equal to one plus.

c)

Summary Introduction

To discuss: Whether the operating leverage is more or less if the sale is 200,000.

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Answer 3

Question

Chapter 10, Problem 17PS

a)

Summary Introduction

To compute: The operating leverage.

b)

Summary Introduction

To show: This operating leverage is equal to one plus.

c)

Summary Introduction

To discuss: Whether the operating leverage is more or less if the sale is 200,000.

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Answer 4

Question

Chapter 10, Problem 17PS

a)

Summary Introduction

To compute: The operating leverage.

b)

Summary Introduction

To show: This operating leverage is equal to one plus.

c)

Summary Introduction

To discuss: Whether the operating leverage is more or less if the sale is 200,000.

Expert Solution & Answer

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Answer 5

Chapter 10, Problem 17PS

a)

Summary Introduction

To compute: The operating leverage.

b)

Summary Introduction

To show: This operating leverage is equal to one plus.

c)

Summary Introduction

To discuss: Whether the operating leverage is more or less if the sale is 200,000.

Answer 6

Chapter 10, Problem 17PS

a)

Summary Introduction

To compute: The operating leverage.

Answer 7

Chapter 10, Problem 17PS

a)

Summary Introduction

To compute: The operating leverage.

Answer 8

b)

Summary Introduction

To show: This operating leverage is equal to one plus.

Answer 9

b)

Summary Introduction

To show: This operating leverage is equal to one plus.

Answer 10

c)

Summary Introduction

To discuss: Whether the operating leverage is more or less if the sale is 200,000.

Answer 11

c)

Summary Introduction

To discuss: Whether the operating leverage is more or less if the sale is 200,000.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 10 - Capital budgeting process True or false? a. The...Ch. 10 - Prob. 2PS Ch. 10 - Prob. 3PS Ch. 10 - Project analysis True or false? a. Sensitivity...Ch. 10 - Prob. 5PS Ch. 10 - Real options True or false? a. Decision trees can...Ch. 10 - Prob. 7PS Ch. 10 - Prob. 9PS Ch. 10 - Prob. 10PS Ch. 10 - Break-even analysis Break-even calculations are...

The operating leverage.

Solution Summary: The author explains how the formula to compute operating leverage is as follows: If 1% rise in sales, from 100,000 units to 101,000 units, the leverage of operating is 2.50.

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To compute: The operating leverage.

To show: This operating leverage is equal to one plus.

To discuss: Whether the operating leverage is more or less if the sale is 200,000.

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