Fastron, Inc. expects sales of silicon chips to be $60 milion this year. Because

  • Thread starter Thread starter queenitrite3
  • Start date Start date
Q

queenitrite3

Guest
this is a very capital-? intensive business, fixed operating costs r $20 mill. The variable cost ratio is 40%. The firm's debt obligations consist of a $4 mill, 10% bank loan and a $20 mill bond issue with an 11% coupon rate. Fastron has 1 million shares of common stock outstanding and its marginal tax rate is 40%.
a. Compute Fastron's degree of operating leverage.
b. Compute Fastron's degree of financial leverage.
c. Compute Dastron's degree of combined leverage.
d. Compute Fastron's EPS if sales decline by 5%
 
Back
Top