Question
1.The management of Graphicopy is trying to determine how much debt they should have in their capital structure. If they sell $15,800,000 in perpetual bonds
1.The management of Graphicopy is trying to determine how much debt they should have in their capital structure. If they sell $15,800,000 in perpetual bonds with a 6.5 percent coupon, what would be the present value of the tax shield? Assume the marginal tax rate is 28%.
2. What is the degree of operating leverage for Flippin Out Company, a maker of scuba flippers, if the firm sells its finished product for $30 per unit with variable costs per unit of $6? The company has fixed operating costs of $5,000,000 and sells 1,000,000 units (the answer is rounded).
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