Chapter 5 Discussion Problem Firm A Firm B units Price Variable Cost Fixed Costs Interest Expense Tax Rate 1,000.00 40.00 30.00 3,000.00 200.00 0.25 units Price Variable Cost Fixed Costs Interest Expense Tax Rate 2,000.00 12.00 8.00 1,200.00 100.00 0.25 0,000.00 Sales 2,000 30,000.00 ess Variable Costs8.00 at 3,000.00 7,000.00 Sales 1,000.00 units at 40.00 dollars Less Variable Costs (30.00 at 1,000.00 units) Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense Earnings after taxes (EAT) 00 units at 2.00 dolla 24,000.00 2,00 16,000.00 1,200.00 Earnings before interest and taxes (EBIT) 6,800.00 100.00 6,700.00 1,675.00 5,025.00 Fixed costs 200.00 6,800.00 1,700.00 5,100.00 Interest expense Earnings before taxes (EBT) Income tax expense Earnings after taxes (EAT) Using the Income Statements (above), compute the degree of operating leverage, degree of financial leverage, degree of combined leverage, and the break-even point in units for each firm Part 1 a. Degree of operating leverage b. Degree of financial leverage c. Degree of combined leverage d. Break-even point in units times times times times times times units units Part 2 Whic firm is riskier? Why