ger, Co paiy sells its product for $20 per unit. Its fixed $10,000 and the variable cost per unit is $10 (a) Determine the break-even point in units and dollars. (c) What is the new break-even point if the price per unit increases from termine the earnings before interest and taxes at sales of 1,500 to $30? (d) Determine the degree of operating leverage at sales of 2.000 and 40 units, respectively 4-6 The Savannah Company has 10,000 shares of common stock outstanding with a par value of $40, and its tax rate is 48 percent. The Savannah Company s weighing the choice among three financing alternatives for a major expansion program which would require $100,000 and increase its operating profit from 90,000 to $125,000. The financing alternatives to raise the needed $100,000are as follows: A buds 2,000 common shares at $50 net to the company. $100,000 of 7 percent preferred stock. $100,000 of 6 percent bonds (a) (b) (c) total b Assuming an EBIT of $125,000 for each alternative, determine the earnings per mon stock vs. preferred stock plan and common stock vs. bond debt plan. Discuss share for each financing plan. Compute the EPS indifference points for the com- Phases budge funds to fina the results. y sells its glass by the square foot. The price pet foot is $5 and variable costs are $3 per square foot. Fixed costs are $60,000, any has $100,000 worth of debt with an interest rate of 10 percent. square and the comp The company is operating at 50,000 square feet. (a) What is the degree of operating leverage? (b) What is the degree of financial leverage? ma