Question
You are provided with the following financial statements that reflect previous period of company operations. Sales $ 15,000,000 Variable Costs $ 7,000,000 Fixed Costs $
You are provided with the following financial statements that reflect previous period of company operations.
Sales $ 15,000,000
Variable Costs $ 7,000,000
Fixed Costs $ 3,000,000
EBIT $ 5,000,000
Interest Expense $ 1,000,000
EBT $ 4,000,000
Tax (0.50) $ 2,000,000
Net Income $ 2,000,000
a. At this level of output, what are the degrees of operating leverage?
b. What are the degrees of financial leverage?
c. What are the degrees of leverage in the combination?
d. If sales increase by 20%, how much percentage will impact EBT (and net income)?
e. What is the breakeven point from this problem
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