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Use the information below to complete your assignment.Fly Away Corporation makes pumps for the aviation industry. The income statement is shown below:Fly Away CorporationSales (5,000
Use the information below to complete your assignment.Fly Away Corporation makes pumps for the aviation industry. The income statement is shown below:Fly Away CorporationSales (5,000 pumps at $25)$125,000 Less: Variable costs (5,000 pumps at $10)$50,000 Fixed Costs$40,000Earnings before interest and taxes (EBIT)$35,000 Interest$7,500Earnings before taxes (EBT)$27,500 Taxes (@35%)$9,625Earnings after taxes (EAT)$17,875Shares Outstanding: 5,000EPS$3.57Use the information from the income statement to compute the following:
- Degree of operating leverage.
- Degree of financial leverage.
- Degree of combined leverage.
- The break-even point.
- Explain the difference between the two types of leverage.
- Recompute with the fixed costs increased to $50,000 and explain what happened to the break-even point.
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