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Calculate the operating leverage of this firm

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Reference no: EM132950047

Question - OceanGate sells external hard drives for $104 each. Its total fixed costs are $35 million, and its variable costs per unit are $68. The corporate tax rate is 31%. If the economy is strong, the firm will sell 4 million drives, but if there is a recession, it will sell only half as many.

a. What will be the percentage decline in sales if the economy enters a recession?

b. What will be the percentage decline in profits if the economy enters a recession?

c. Calculate the operating leverage of this firm?

Reference no: EM132950047

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