QUESTION 6

a) The following data is available for Firm A

Firm A

Quantity

Selling price

Variable cost

Fixed costs

Interest

Preferred dividend

Tax rate

20,000 units

$. 20

$. 15

$. 40,000

$. 10,000

$. 5,000

30%

Required:

i. Overall break - even point in units.

ii. Degree of operating leverage.

iii. Degree of financial leverage.

iv. Degree of total leverage.