Question
STOP FLAGGING MY QUESTION. I NEED HW ASSISTANCE. I will not use the tutor's work as my own. What is operating leverage, and how does
STOP FLAGGING MY QUESTION. I NEED HW ASSISTANCE. I will not use the tutor's work as my own.
What is operating leverage, and how does it affect a firm's business risk?
a.What is the operating break-even point if a company has fixed costs of $22,000, a sales price of $36, and variables costs of $14.
b.What is the break-even quantity if the price is decreased to $30?
c.What is the break-even point if the price is decreased to $30 and costs increase to $19?
d.Now, to develop an example which can be presented to Bernie's management to illustrate the effects of financial leverage, consider two hypothetical firms:Firm U, which uses no debt financing, and Firm L, which uses $75,000 of 5 percent debt.Both firms have $250,000 in assets, a 25 percent tax rate, and an expected EBIT of $60,000.
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