Computation of financial leverage and forcasting the eps at, Ask an Expert

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Computation of financial leverage and forcasting the EPS at change in sales

McFrugal has expected sales of $20 million. Fixed operating costs are $2.5 million and the variable cost ratio is 65%. They have outstanding a $12 million, 8% bank loan. They also have outstanding 1 million shares of common stock ($1 par value). Tax rate is 40%.

A. compute degree of operating leverage at a sales level of $20 million

B. computes current degree of financial leverage

C. forecast EPS if sales drop to $15 million

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9166510

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