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Integrativelong dash—Multiple leverage measures Play-More Toys produces inflatable beach? balls, selling 400,000 balls per year. Each ball produced has a variable operating cost of $0.89 and sells for $1.23. Fixed operating costs are $26,000. The firm has annual interest charges of $6,400?, preferred dividends of $1,900?, and a 40% tax rate.
a. Calculate the operating breakeven point in units.
b. Use the degree of operating leverage? (DOL) formula to calculate DOL.
c. Use the degree of financial leverage? (DFL) formula to calculate DFL.
d. Use the degree of total leverage? (DTL) formula to calculate DTL. Compare this to the product of DOL and DFL calculated in parts ?(b?) and ?(c?).
St. Benedict's Hospital has three support departments and four patient services departments. The direct costs to each of the support departments are General Administration $2,000,000 Facilities 5,000,000 Financial services 3,000,000. What are the cos..
Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating workin..
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Define the default risk, liquidity risk and reinvestment risk
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A relaxation can have a different objective function than the problem relaxed. - Can a restriction also be defined to allow this?
Sewer's Paradise is an all equity firm that has 5,000 shares of stock outstanding at a market price of $15 a share. The firm's management has decided to issue $30,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The ..
If Southwick reduces their inventory by $500,000 through more efficient inventory management and invests the proceeds in marketable securities what happens to the Current, quick and debt to equity ratio?
Which investment would have a lower dollar market value (price)? For each pair of alternatives, indicate your correct choice: A three-month treasury bill with a discount yield of 6%? A three-month treasury bill with a discount yield of 5%,
How do shareholders earn returns from investing in stocks? How is the market value of a firm determined? What determines the market price of a stock?
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