Mary Benn, CFA, is a nancial analyst for Twin Fields Investments, located in Storrs, Connecticut,

U.S.A. She has been asked by her supervisor, Bill Cho, to examine two small Japanese cell phone

component manufacturers: 4G, Inc., and Qphone Corp. Cho indicates that his clients are most

interested in the use of leverage by 4G and Qphone. Benn states, "I will have to specically analyze

each company's respective business risk, sales risk, operating risk, and nancial risk." Benn begins her

analysis by examining the sales prospects of the two rms. The results of her sales analysis appear in

Exhibit A. She also expects very little price variability for these cell phones. She next gathers more data

on these two companies to assist her analysis of their operating and nancial risk. The relevant data for

analysis of 4G is contained in Exhibit B, while Benn's analysis of the Qphone data appears in Exhibit C.

Required:

a) Based on the information in Exhibit B, calculate the degree of operating leverage (DOL) of

4G, Inc., at unit sales of 1,200,000.

b) Based on the information in Exhibit B, 4G, Inc.'s calculate the degree of nancial leverage

(DFL), at unit sales of 1,000,000.

c) Based on the information in Exhibit A and Exhibit C, calculate the Qphone's expected

percentage change in operating income for 2010.

d) Calculate the 4G's breakeven quantity of unit sales.