Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

P12-17 (similar to) Question Help Integrative Multiple leverage measures and prediction Carolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for $6.21. Each

image text in transcribed

P12-17 (similar to) Question Help Integrative Multiple leverage measures and prediction Carolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for $6.21. Each latch has variable operating costs of $3.42. Fixed operating costs are $50,000 per year. The firm pays $13,000 interest and preferred dividends of $6,600 per year. At this point, the firm is selling 34,000 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 34,000 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 14,500 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 a. Carolina Fastener's operating breakeven point is units. (Round to the nearest integer.) P12-17 (similar to) Question Help Integrative Multiple leverage measures and prediction Carolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for $6.21. Each latch has variable operating costs of $3.42. Fixed operating costs are $50,000 per year. The firm pays $13,000 interest and preferred dividends of $6,600 per year. At this point, the firm is selling 34,000 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 34,000 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 14,500 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 a. Carolina Fastener's operating breakeven point is units. (Round to the nearest integer.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Canadian Multinationals And International Finance

Authors: Gregory P. Marchildon, Duncan McDowall

1st Edition

0714634816, 978-0714634814

More Books

Students also viewed these Finance questions

Question

Define Administration?

Answered: 1 week ago

Question

Discuss the key people management challenges that Dorian faced.

Answered: 1 week ago

Question

How fast should bidder managers move into the target?

Answered: 1 week ago