Question
Albatross Airlines fixed operating costs are $5.8 million, and its variable cost ratio is 0.20. The firm has $2 million in bonds outstanding with a
Albatross Airlines fixed operating costs are $5.8 million, and its variable cost ratio is 0.20. The firm has $2 million in bonds outstanding with a coupon interest rate of 8 percent. Albatross has 30,000 shares of preferred stock outstanding, which pays a $2.00 annual dividend. there are 100,000 shares of common stock outstanding. Revenues for the firm are $8 million, and the firm is in the 40 percent corporate income tax bracket. Compute the degree of operating leverage for the firm.
A. calculate the degree of operating leverage
B. calculate the degree of financial leverage for Albatross Airlines
C, Calculate degree of combined leverage and interpret this value
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