Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Question F asks for: percent change in EBT estimated new EBIT % change in earnings for common stockholders new earnings available for common stockholders EBT
Question F asks for:
percent change in EBT
estimated new EBIT
% change in earnings for common stockholders
new earnings available for common stockholders
EBT will be
calculate the earnings available:
Integrative Multiple leverage measures and prediction Carolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for $6.11. Each latch has variable operating costs of $3.45. Fixed operating costs are $49,400 per year. The firm pays $12,600 interest and preferred dividends of $6,700 per year. At this point, the firm is selling 35,000 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 35,000 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 15,100 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 available for common, using the basic information given. Integrative Multiple leverage measures and prediction Carolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for $6.11. Each latch has variable operating costs of $3.45. Fixed operating costs are $49,400 per year. The firm pays $12,600 interest and preferred dividends of $6,700 per year. At this point, the firm is selling 35,000 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 35,000 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 15,100 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 available for common, using the basic information givenStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started