Computation of Degree of operating leverage, financial leverage, degree of combined leverage.
I have a problem on fixed operating cost they are 5.8 million as it variable cost ratio is 0.20 the firm has$2 million on bonds outstanding with a coupon interest rate of 8%. They have 30,000 shares of preferred stock outstanding which pays$2 annual dividend there are 100,000 shares of common stock outstanding. Revenues for the firm are$8 million and the firm is in the 40 percent income tax bracket. I need to compute degree of operating leverage and financial leverage and to compute the degree of combined leverage and interpret the value. Can you help me what equations to use?