Compute degree of operating leverage and combined leverage

Assignment Help Finance Basics

Reference no: EM1310762

Compute Degree of operating leverage, financial leverage & combined leverage and interpreting these values.

Albatross Airline's fixed operating costs are 5.8 mil, and its variable cost ratio is 0.20. The firm has 2 mil in bonds outstanding with a coupon interest rate of 8 percent. Albatross has 30,000 shares of preferred stock outstanding, which pays a $2 annual dividend. There are 100,000 shares of common stock outstanding. Revenue for the firm are 8 mil, and the firm is in the 40 percent corporate income tax bracket.

1. Compute Albatross' degree of operating leverage.

2. Compute its degree of financial leverage.

3. Compute its degree of combined leverage and interpret this value.

Reference no: EM1310762

Questions Cloud

What is the net present value of the investment : What is the net present value of the investment? Round to the nearest dollar. and Should the robot be acquired by the firm? Explain.

Sociological approach toward social problems : Citing our textbook material, describe how the sociological approach toward social problems distinct from other approaches.

Purchased inventory on account : Purchased inventory on account and Sold inventory below its cost at a loss

Database and characteristics of database : Explain the Database and describe the four characteristics of the database? Explain the Relational Database and generate a relational database for 5 employees.

Compute degree of operating leverage and combined leverage : Compute Degree of operating leverage and combined leverage & financial leverage and interpreting these values.

Expected return and standard deviation for portfolio : Compute the expected return and standard deviation for portfolio if Diane borrows the extra $1000 at risk free rate of 4% and invest everything in market portfolio.

Questions about egocentrism : There are several questions regarding Egocentrism; to what extent does the person use other people to get what s/he wants?

Calculation of free cash flow for cade : Calculation of free cash flow for Cade. and How much cash did Cade pay to vendors for inventory during the period and How much cash did Cade pay in income taxes?

Sectors on the physical device : For any volume(s) situated on the EnCE Hard Drive, answer the following questions by writing question number and answer within a Notes Bookmark. Keep the Notes Bookmark within the bookmark folder created for that volume. Specify how many sectors a..

User Account

All Pages