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Operating breakeven and DOL ABC Corp produces gizmos that sell for $60/unit. Variable cost is $35/unit. Annual fixed costs are $150,000. Annual depreciation charges are $50,000. [Mimic the steps in problems 1, 2, and 3] 1. 2. 3. What is the accounting (or, operating) breakeven of level of sales? What is the cash breakeven level of sales? Compute the Degree of Operating Leverage (DOL) between sales levels of 20,000 and 24,000 units Financial breakeven and DFL: 4. What is financial breakeven EBIT level for a firm that has $100 million debt @ 8% and annual Pfd Dividends of $2.6 million. The firm faces a tax rate of 35%. [Mimic the steps from problem 4] 5. XYZ Co produces Gidgets that sell for $35/unit, variable cost = $12/ unit, annual fixed cost $720,000, depreciation = $325,000. The firm has annual interest expense of $450,000, and faces tax rates of 35%. XYZ has 100,000 shares outstanding. Compute the firm's DOL and DFL between sales levels of 70,000 and 75,000 units. [Mimic steps from problem 5] 6. DEF Co has an expansion of $10 million. Two financing plans are being discussed: Plan A consists of $3 million 9.5% debt and the remaining $ 7 million raised by selling 200,000 shares of common stock at $35 per share. Plan B has $5 million debt at 10.5% and $5 million raised by selling 125,000 shares of common stock at $40 per share. DEF expects to generate annual EBIT of $1,500,000 from this project. It has a tax rate is 40%. Compute the EPS corresponding to each financing plan. Mimic steps from Problem 61