Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please answer ASAP Metal Inc. sells its tanks for $150 each and has variable costs of $75 per unit. Fixed costs amount to $2,000,000 and

please answer ASAP
image text in transcribed
Metal Inc. sells its tanks for $150 each and has variable costs of $75 per unit. Fixed costs amount to $2,000,000 and the company's tax rate is 30%. Sales for 2021 amounted to 50,000 tanks. The company has $20 mil of equity and $10 mil worth of bonds with a coupon rate of 8%. The current yield on the bonds is 7% 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 20% increase in sales. (2 marks) f Interest rates have been increasing steadily over the past 3 months. Advise management on the implications of this for the company. (4 marks)

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

Step: 3

blur-text-image

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

Making Auditors Effective Theory Evidence Perspectives

Authors: Mark Schelker

1st Edition

3832934375, 978-3832934378

More Books

Students also viewed these Accounting questions

Question

How did the state benefit from prohibiting spam?

Answered: 1 week ago