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problem: Faston Inc expects sales of silicon chips to be 60 million dollar this year. Because this is a very capital intensive business, fixed operating costs are 20 million dollar. The variable cost ratio is 40 percent. The firm's debt obligations consist of a $4million, 10% bank loan and a 20 million dollar bond issue with an 11% coupon rate. Faston has 1 million shares of common stock outstanding, & its marginal tax rate is 40%

[A] find out Faston's degree of combined leverage

[B] find out Faston's EPS if sales decline by 5%

[C] find out Faston's degree of operating leverage

[D] find out Faston's degree of financial leverage

Basic Finance, Finance

  • Category:- Basic Finance
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