Question
Illinois Tool Company's (ITC) fixed operating costs are $1,260,000, and its variable cost ratio (i.e., variable costs as a fraction of sales) is 0.70. The
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Illinois Tool Company's (ITC) fixed operating costs are $1,260,000, and its variable cost ratio (i.e., variable costs as a fraction of sales) is 0.70.
The firm has $3,000,000 in bonds outstanding at an interest rate of 8%. ITC has 30,000 shares of $5 preferred stock and 150,000 shares of common stock outstanding. ITC is in the 50% corporate income tax bracket.
Forecasted sales for next year are $9 million. What is ITC's degree of combined leverage at
a sales level of $10 million?
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Financial Trading And Investing
Authors: John Teall
1st Edition
0123918804, 978-0123918802
