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Calculate gibson degree of combined leverage for year

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Reference no: EM132966395

Gibson Company sales for the Year 1 were $3 million. The firm's variable operating cost ratio was 0.50, and fixed costs (that is, overhead and depreciation) were $1,000,000. Its average (and marginal) income tax rate is 40 percent. Currently, the firm has $2.6 million of long-term bank loans outstanding at an average interest rate of 11.5 percent. The remainder of the firm's capital structure consists of common stock (70,000 shares outstanding at the present time).

Problem 1: Calculate Gibson's degree of combined leverage for Year 1. Round your answer to two decimal places

Reference no: EM132966395

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