Albatross Airlines fixed operating costs are $5.4 million, and its variable cost ratio is 0.25. The firm has $2.9 million in bonds outstanding with a coupon interest rate of 7 percent. Albatross has 20,000 shares of preferred stock outstanding, which pays a $1.65 annual dividend. There are 80,000 shares of common stock outstanding. Revenues for the firm are $12 million, and the firm is in the 40 percent corporate income tax bracket. Compute the following for the firm. Round your answers to three decimal places.

1. Degree of operating leverage:

2. Degree of financial leverage:

3. Degree of combined leverage:

   Interpret this value. Enter your answer for dollar value in whole dollar. For example, an answer of $1.20 million should be entered as 1,200,000, not 1.20.

   

eBook Albatross Airline's fixed operating costs are $5.4 million, and its variable cost ratio is 0.25. The firm has $2.9 million in bonds outstanding with a coupon interest rate of 7 percent. Albatross has 20,000 shares of preferred stock outstanding, which pays a $1.65 annual dividend. There are 80,000 shares of common stock outstanding. Revenues for the firm are $12 million, and the firm is in the 40 percent corporate income tax bracket. Compute the following for the firm. Round your answers to three decimal places. a. Degree of operating leverage: 2.500 b. Degree of financial leverage: 1.077 c. Degree of combined leverage: 2.693 Interpret this value. Enter your answer for dollar value in whole dollar. For example, an answer of $1.20 million should be entered as 1,200,000, not 1.20. From a base sales level of $ each one percent increase in sales results in a percent increase in EPS Show All Feedback