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16-11 Mercury Air’s debt consists of $50,000 in accounts payable, $100,000 in 10 percent notes payable. And...

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Finance

16-11

Mercury Air’s debt consists of $50,000 in accountspayable, $100,000 in 10 percent notes payable. And $240,000 in 8percent bonds. Mercury has no preferred stock. If its marginal taxrate is 35 percent, what is Mercury’s financial breakevenpoint?

16-14

Stumpy’s Gator Farm forecasts that its net income willbe $46,800 this year. The firm’s marginal tax rate is 35 percent,and it must pay $36,000 interest on outstanding debt. Stumpy’s hasno preferred stock. What is the firm’s degree of financial leverage(DFL)?

Answer & Explanation Solved by verified expert
4.5 Ratings (849 Votes)
1611 Notes payable 100000 Interest expense on notes payable Notes payable x interest rate 100000 x 10 10000 Bonds 2400000 Interest expense on bonds Bonds x interest rate    See Answer
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