Carolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for $6.00. Each latch...
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Carolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for $6.00. Each latch has variable operating costs of $3.50. Fixed operating costs are $4166.67 per month. The firm has a debt of $130,000 for which it pays 10% interest per annum and preferred stock of $170,000 of which it pays 10% dividend dividends per year. At this point, the firm is selling 30,000 latches a year and is taxed at 40%.
On the basis of the firms current sales of 30,000 units per year and its interest and preferred dividend costs, calculate its EBIT and net profits.
Calculate the firms degree of operating leverage (DOL).
Calculate the firms degree of financial leverage (DFL).
Calculate the firms degree of total leverage (DTL).
Carolina Fastener has entered into a contract to produce and sell an additional 15,000 latches in the coming year. Use the DOL, DFL, and DTL to predict and calculate the changes in EBIT and net profit. Check your work by a simple calculation of Carolina Fasteners EBIT and net profit, using the basic information given.
Briefly explain the concept of Stock split with example from any stock of Dhaka stock exchange.
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