Question
PQR Manufacturing Corporation has $2,500,000 in debt outstanding. The company's before-tax cost of debt is 10%. Sales for the year totaled $4,200,000 and variable costs
PQR Manufacturing Corporation has $2,500,000 in debt outstanding. The company's before-tax cost of debt is 10%. Sales for the year totaled $4,200,000 and variable costs were 52% of sales. Net income was equal to $790,000 and the company's tax rate was 30%. If PQR's degree of total leverage is equal to 1.30, what is its degree of operating leverage? Do not round intermediate calculations.
a. 1.5358
b. 1.5880
c. 1.0642
d. 0.9100
e. 1.1004.
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Solution aCalculation of Earnings before tax EBT The formula for calculating the Degree of Earnings before tax is EBT Net income 1 Tax rate As per the ...
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Financial Accounting An Introduction to Concepts, Methods and Uses
Authors: Roman L. Weil, Katherine Schipper, Jennifer Francis
14th edition
978-1111823450, 1-133-36617-1 , 1111823456, 978-1-133-3661, 978-1133591023
