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GHI Inc. sells lanterns for $40 each and has variable costs of $30 per unit. Fixed costs amount to $400,000 and the company's tax rate
GHI Inc. sells lanterns for $40 each and has variable costs of $30 per unit. Fixed costs amount to $400,000 and the company's tax rate is 25%. Sales for 2023 amounted to 90,000 lanterns. The company has $6 mil of equity and $3 mil worth of bonds with a coupon rate of 6%. The current yield on the bonds is 5% Required: a. Prepare the company's income statement (4 marks) b. Calculate the company's degree of operating leverage (2 marks) c. Calculate the company's degree of financial leverage (2 marks) d. Calculate the company's degree of combined leverage ( 2 marks) e. Given the degree of combined leverage calculated in part d. Comment on the effect of a 15% increase
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