Atech has fixed costs of $7 million and profits of $4 million. Its competitor, ZTech, is roughly

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Atech has fixed costs of $7 million and profits of $4 million. Its competitor, ZTech, is roughly the same size and this year earned the same profits, $4 million. However, ZTech operates with fixed costs of $5 million and lower variable costs.

a. Which firm has higher operating leverage?

b. Which firm will likely have higher profits if the economy strengthens?

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Investments

ISBN: 9781259277177

11th Edition

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

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