Firm A Firm B units Price Variable Cost Fixed Costs Interest Expense Tax Rate 140.00 850.00 50.00 45,000.00 1,000.00 0.30 units Price Variable Cost Fixed Costs Interest Expense Tax Rate 500.00 50.00 12.00 12,000.00 1,000.00 0.30 Sales 140 units at 850 dollars Less Variable Costs (50 at 140 units) Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense Earnings after taxes (EAT) 119,000.00 7,000.00 45,000.00 67,000.00 1,000.00 66,000.00 19,800.00 46,200.00 Sales 500 units at 50 dollars Less Variable Costs (12 at 500 units) Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense Earnings after taxes (EAT) 25,000.00 6,000.00 12,000.00 7,000.00 1,000.00 6,000.00 1,800.00 4,200.00 Part 1 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. a. Degree of operating leverage Itimes times b. Degree of financial leverage times times c. Degree of combined leverage times times d. Break-even point in units units units Part 2 Which firm is riskier? Why