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Question 2 Two firms, Marchand and Gruenler, from the same industry reported the following income statements. a. Calculate the operating leverage for the two firms
Question 2 Two firms, Marchand and Gruenler, from the same industry reported the following income statements. a. Calculate the operating leverage for the two firms (using 2018 sales as the base) b. Compare the leverage of all types used by the two firms and discuss its impact on the firms' cost of capital. 2018 2019 $110,000$150,000 Marchand, Inc. Sales -COGS and Other Variable Operating Costs -Fixed Operating Costs EBIT Interest EBT -Taxes Net Income - 77,00C 105,000 - 15,00C- 15,000 18,000 30,000 - C- 0 18,000 30,000 - 5,400- 9,000 $ 12,60CS 21,000 2003 2004 $110,000$150,000 Gruenler, Inc. Sales -COGS and Other Variable Operating Costs -Fixed Operating Costs EBIT -Interest EBT -Taxes Net Income - 66,000- 90,000 - 25,000- 25,000 19,000 35,000 5,000- 5,000 14,000 30,000 - 4,200- 9,000 $ 9,800S 21,000
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