LPM Corporation sells its product for $10 each. Fixed operating costs equal $100,000, and variable operating costs

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LPM Corporation sells its product for $10 each. Fixed operating costs equal $100,000, and variable operating costs are 75 percent of the selling price. The firm pays $37,500 in interest, and its marginal tax rate is 35 percent.

(a) What are LPM’s operating breakeven point and financial breakeven point?

(b) If LPM expects to sell 65,000 units, what are its degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of total leverage

(DTL)?

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Cfin4 Plus Coursemate Printed Access Card 2014

ISBN: 9781285434544

1st Student Edition

Authors: Scott Besley, Eugene F. Brigham

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