IntegrativeMultiple

leverage measures and predictionCarolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for

$6.00.

Each latch has variable operating costs of

$3.50.

Fixed operating costs are

$50,000

per year. The firm pays

$13,000

interest and preferred dividends of

$7,000

per year. At thispoint, the firm is selling

30,000

latches per year and is taxed at a rate of

40%.

a. Calculate Carolina Fastener's operating breakeven

point.

b. On the basis of the firm's current sales of

30,000

units per year and its interest and preferred dividend costs, calculate its EBIT and earnings available for common stockholders (EACS).

c. Calculate the firm's degree of operating leverage (DOL).

d. Calculate the firm's degree of financial leverage (DFL).

e. Calculate the firm's degree of total leverage (DTL).

f. Carolina Fastener has entered into a contract to produce and sell an additional

15,000

latches in the coming year. Use the DOL, DFL, and DTL to predict and calculate the changes in EBIT and earnings available for common. Check your work by a simple calculation of Carolina Fastener's EBIT and earnings available forcommon, using the basic information given.

Integrative--Multiple leverage measures and prediction Carolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for $6.00. Each latch has variable operating costs of $3.50. Fixed operating costs are $50,000 per year. The firm pays $13,000 interest and preferred dividends of $7,000 per year. At this point, the firm is selling 30,000 latches per year and is taxed at a rate of 40% a. Calculate Carolina Fastener's operating breakeven point b. On the basis of the firm's current sales of 30,000 units per year and its interest and preferred dividend costs, calculate its EBIT and earnings available for common stockholders (EACS). c. Calculate the firm's degree of operating leverage (DOL). d. Calculate the firm's degree of financial leverage (DFL), e. Calculate the firm's degree of total leverage (DTL). Carolina Fastener has entered into a contract to produce and sell an additional 15,000 latches in the coming year. Use the DOL, OFL, and DTL to predict and calculate the changes in EBIT and earnings available for common Check your work by a simple calculation of Carolina Fastener's EBIT and earnings available for common, using the basic information given