Computation of various leverages and if the firm wishes to, Ask an Expert

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Computation of various leverages

A firm has a sales of $10 million, variable costs of $5 million, EBIT of $2 million, and a degree of combined leverage of 3.0.

a. If the firm has no preferred stock, what are its annual interest charges?

b. If the firm wishes to lower its degree of combined leverage to 2.5 by reducing interest charges, what will the new level of annual interest charges be?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9166533

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