A firm wants to evaluate two operating structures and has the following information The firm...
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A firm wants to evaluate two operating structures and has the following information The firm has annual interest expense of $1000 The number of common shares outstanding are 2000 .The tax rate is 40 percent VC / unit P/ unit FC $6.00 $11 $2,500 operating structure #1 $12 $2,600 operating structure #2 $5.00 For each operating structure, calculate (a) .EBIT, Net Profit after tax, and EPS at 13000, 14000, and 15000 units -1 the degree of operating leverage (DOL) and degree of total leverage -2 (DTL) using 14000 units .as a base sales level .the operating breakeven point in units -3 DIE (DTL) using 14000 units .as a base sales level .the operating breakeven point in units -3 Which operating structure has greater operating leverage and business (b) ?risk If projected sales are 14000 units, which operating structure do you (c) ?recommend for the firm The EBIT, Net Profit after tax, and EPS-1 EBIT h 15,000 14,000 13,000 operating structure #1 #2 Net Profit after tax operating DE #2 Net Profit after tax 15,000 14,000 13,000 operating structure #1 #2 EPS 15,000 14,000 13,000 operating structure #1 #2 The degree of operating leverage (DOL) and degree of total leverage (DTL) -2 w operating
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