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2. Imagine that you were hired recently as a financial analyst for a relatively new, highly leveraged ski manufacturer located in the foothills of Colorado's
2. Imagine that you were hired recently as a financial analyst for a relatively new, highly leveraged ski manufacturer located in the foothills of Colorado's Rocky Mountains. Your firm manufactures only one product, a state-of-the-art snowboard. Up to this point the company has been operating without much quantitative knowledge of the business and financial risks it faces. Ski season just ended, however, so the president of the company has started to focus more on the financial aspects of managing the business. He has set up a meeting for next week with the CFO, Maria Sanchez, to discuss matters such as the business and financial risks faced by the company. Accordingly, Maria has asked you to prepare an analysis to assist her in her discussions with the president. As a first step in your work, you compiled the following information regarding the cost structure of the company: Output level Operating assets Operating asset turnover Return on operating assets Degree of operating leverage Interest expense Marginal Tax Rate 80,000 units $ 4,000,000 8 times 32% 6 times $ 600,000 21%
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