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2. Computing and interpreting the degree of operating leverage (DOL) It is December 31. Last year, Praxis Corporation had sales of $16,000,000, and it forecasts
2. Computing and interpreting the degree of operating leverage (DOL) It is December 31. Last year, Praxis Corporation had sales of $16,000,000, and it forecasts that next year's sales will be $17,120,000. Its fixed costs have been and are expected to continue to be $2,000,000, and its variable cost ratio Is 55.00%. Praxis's capital structure consists of a $13.5 million bank loan, on which it pays an interest rate of 6.00% and 300,000 shares of common equity. The company's profits are taxed at a marginal rate of 35.00% Given this data, complete the following sentences: The percentage change in the company's sales is The percentage change in EBIT is The degree of operating leverage (DOL) at $17,120,000 is There are several ways to use and interpret a firm's DOL value. Consider the following statement and indicate whether it accurately reflects the meaning or an appropriate use of a firm's DOL value. Activities that change the distribution of a firm's fixed and variable cost structures, such as outsourcing, will affect a fin's DOL True or False: This statement accurately describes a firm's DOL False True
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