A company is trying to decide on their use of operating and financial leverage from among four choices. Their Interest Expense is the Interest Rate times Debt. Their Tax Rate is 40%

Please explain your answer

Option Fixed Costs Variable Costs Debt Interest Rate

1. 20000 70% of Sales 0 0%

2. 50000 40% of Sales 0 0%

3. 20000 70% of Sales 500,000 10%

4. 50000 40% of Sales 500,000 10%

What is their Degree of Operating Leverage under option 1 if sales are $200,000?

What is their Degree of Financial Leverage under option 4 if EBIT is $120,000?

If Sales rise by 10% from 300,000 to 330,000 under option 3, then EBT will increase by what percent?

At what level of Sales will the Degree of Operating Leverage = 2 under Option 2?

At what level of Sales will the EBT under Option 1 equal the EBT under Option 4?

At what level of Net Income will options 2 and 3 have the same Net Income?