2.

1. Please see the income statement below - calculate:

   1. Degree of operating leverage

   2. Degree of financial leverage

   3. Degree of total leverage

Sales	$150,000
Variable Operating Costs	(105,000)
Gross Profit	45,000
Fixed Operating Costs	(20,000)
Net Operating Income	25,000
Interest	(15,000)
Earnings before Taxes	10,000
Taxes (40%)	(4,000)
Net Income	$6,000

a) Construct NPV profiles for Projects X and Z (complete the following ta Discount Rate NPV X Profile NPV Z Profile Calculate each project's IRR Project X IRR Project Z IRR 2) Which project would you choose for the following rates? d) At what rate do the NPV profiles of the two projects cross? Year Difference in cash flows