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Calculate gibson expected degree of combined leverage

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Reference no: EM132966396

Problem 1: Gibson is forecasting a 10 percent increase in sales for next year (Year 2). Furthermore, the firm is planning to purchase additional labor-saving equipment, which will increase fixed costs by $150,000 and reduce the variable cost ratio to 0.475. Financing this equipment with debt will require additional bank loans of $600,000 at an interest rate of 11.5 percent. Calculate Gibson's expected degree of combined leverage for Year 2.

Reference no: EM132966396

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