Calculate the degree of leverage for the two projects

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Q1- You has been provided with the following information about two investment projects: as financial manager What is needed is:

1. Calculate the degree of leverage for the two projects

2. Which of the two projects is more dangerous?

 

Company A

Company B

Earnings before interest and taxes (in dollars)

50,000

30,000

Total debt (in dollars)

10,000

5,000

interest rate on debt

10%

10%

Debt interest costs (total debt x debt interest rate)

1,000

500

Q2- Dubai Industry Company plans to finance its new investment project by obtaining a loan from the National Bank of Dubai covering the entire value of this investment in the amount of 1,500,000 dollars. If you know that the required interest rate of the bank on this loan is 6%, then it must be paid in 12 payments annually for 10 years.

wanted/ Calculate the cost of this financing?

(Please explain and clarify the equation)

Reference no: EM133114840

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