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Problem 2 (18 marks) You have been provided the following income statements for Tiger Industries and SMU DAWG Incorporated. Tiger SMU DAWg Industies Industries 2019
Problem 2 (18 marks)
You have been provided the following income statements for Tiger Industries and SMU DAWG Incorporated.
| Tiger | SMU DAWg | |
| Industies | Industries | |
| 2019 Income Statement | ||
| Sale | 18,780 | 11,268 |
| Cost of Goods Sold | 9010 | 5406 |
| Fixed Costs | 3250 | 1950 |
| Depreciation | 2450 | 1470 |
| Earnings Before Interest and Taxes | 4070 | 2442 |
| Interest | 3065 | 1839 |
| Income before taxes | 1005 | 603 |
| Income Taxes | 402 | 211 |
| Net Income | 603 | 392 |
| Shares o/s | 100 | 65 |
- Calculate the degree of operating leverage for each firm. Show your work (4 marks)
- Calculate the degree of financial leverage for each firm. (4 marks)
- Calculate the degree of combined leverage for each firm. (4 marks)
- If both firms were to experience a 15% increase in sales, what is the percentage change impact in the EPS and what is the new EPS for each firm. (4 marks)
- Which firm is more risky? (2 marks)
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Mergers Acquisitions And Other Restructuring Activities
Authors: Donald DePamphilis
11th Edition
012819782X, 978-0128197820
