Calculate the firms degree of financial leverage

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Reference no: EM13870637

Carolina Fastener, Inc., makes a patented marine bulkhead latch that wholesales for $6.18. Each latch has variable operating costs of $3.44. Fixed operating costs are $49,600.00 per year. The firm pays $12,300 interest and preferred dividends of $6,000 per year. At this point, the firm is selling $32,000 latches per year and is taxed at a rate of 40%.

Calculate Carolina Fastener’s operating breakeven point.

On the basis of the firm’s current sales of 32,000 units per year and its interest and preferred dividend costs, calculate its EBIT and earnings available for common stockholders. (EACS)

Calculate the earnings available for common below

EBIT -----?

Less: Interest expense ---?

EBT---- ?

Less: taxes (40%) --------?

Net profits -------?

Preferred stock dividend ---------?

EACS -------?

Calculate the firm’s degree of operating leverage (DOL).

Calculate the firm’s degree of financial leverage (DFL).

Calculate the firm’s degree of total leverage (DTL).

Carolina Fastener has entered into a contract to produce and sell an additional 15,700 latches in the coming year. Use the DOL, DFL, and DTL to predict and calculate the changes in EBIT and earnings available for common. Check your work by a simple calculation of Carolina Fastener’s EBIT and earnings available for common, using the basic information given

Carolina Fastener has entered into a contract to produce and sell an additional 15,700 latches in the coming year; the percentage change in sales will be --------?

The estimate new EBIT will be ----------?

The estimated new EBIT will be ______?

The percentage change in earnings available for common stockholders will be ----------?

The new earnings available for common stockholders will be __________?

Check your work by a simple calculation of Carolina fasterner’s EBIT available for common, using the basic information given the EBIT will be ---------?

Calculate the earnings available for common below __________?

Reference no: EM13870637

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