A firm has sales of $10 million, variable costs of $4 million, fixed expenses of $1.5 million,

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A firm has sales of $10 million, variable costs of $4 million, fixed expenses of $1.5 million, interest costs of $2 million and has a 30 percent average tax rate.

a. Compute its DOL, DFL, and DCL.

b. What will be the expected level of EBIT and net income if next year’s sales rise 10 percent?

c. What will be the expected level of EBIT and net income if next year’s sales fall 20 percent?

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Introduction to Finance Markets Investments and Financial Management

ISBN: 978-1118492673

15th edition

Authors: Melicher Ronald, Norton Edgar

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Question Posted: Mar 27, 2015 12:44 PM

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A firm has sales of $10 million, variable costs of $4 million, fixed expenses of $1.5 million,

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a DOL S VCS VC FC 10 445 133 DFL EBITEBIT I 4545 20 18 DCL 133 18 240 b EBIT w...View the full answer

Introduction to Finance Markets Investments and Financial Management

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