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A. Firm A produced 5,000 units last year, fixed costs were $50,000, selling price was $75, and variable unit cost was $55. What was the firm’s degree of operating leverage (DOL)? If Sales increases by 5%, what will be the effect on EBIT?

B. Firm A has EBIT of $50,000 and interest expense of $30,000. What was the firm’s degree of financial leverage (DFL)? If EBIT increases by 5%, what will be the effect on earnings per share?

C. What is the firm’s degree of total leverage (DTL)? If Sales increases by 2%, what will be the effect on earnings per share? (Please show all work).

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92317909

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