2. Now consider operating leverage. How should the shipping costs be valued, assuming that output is known
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2. Now consider operating leverage. How should the shipping costs be valued, assuming that output is known and the costs are fixed? How would your answer change if the shipping costs were proportional to output? Assume that unexpected fluctuations in output are zero-beta and diversifiable. (Hint: The Jones’s oil company has an excellent credit rating. Its long-term borrowing rate is only 7%.)
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Related Book For
Principles Of Corporate Finance
ISBN: 9781264080946
14th Edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans
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