Question
1.Amber Angler's fixed operating costs are $2m and its variable cost ratio 70%. The firm has $2.1m in bonds outstanding at an interest rate of
1.Amber Angler's fixed operating costs are $2m and its variable cost ratio 70%. The firm has $2.1m in bonds outstanding at an interest rate of 4%. Amber has 0.05m shares of preferred stock which pays a $4 dividend. Crow is in the 40% corporate income tax bracket. Forecasted sales for next year are $9m. What is Amber's degree of financial leverage?
Round to two decimal places.
b.A firm with a DFL of 1.9 expects EBIT to increase by 3.90%. If our last EPS was $1.76, what will our new EPS be?
c.If a firm has a DOL of 1.90 and a DFL of 1.87, what is its DCL?
d.If a firm has a DCL of 2.26 and expects sales to increase by 5%, how much will EPS increase by?
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International financial management
Authors: Jeff Madura
9th Edition
978-0324593495, 324568207, 324568193, 032459349X, 9780324568202, 9780324568196, 978-0324593471
