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..

Reviews

Write a Review

Finance Basics Questions & Answers

  Computation of book value per share

Compute the book value per share based on the reported stockholders' equity account for Bridgford Foods in fiscal year

  Computaion of market to book ratio

Computaion of market to book ratio and A firm has current assets which could be sold for their book value of $10 million

  Determining the portfolio-s expected returns

Portfolio is invested 37.7% in Stock A, 26.6% in Stock B, and remainder in Stock C. Expected returns are 19%, 26.1%, and 11.8% respectively. Determine the portfolio's expected returns?

  It is true that vertical integration involves the competitor

it is is true that Vertical integration involves the acquisition of competitors and Synergy is a common motive for mergers

  Describing firms which issue commercial paper in singapore

Write down name of 5 firms which issue commercial paper in Singapore. How did subprime crisis influence market for commercial paper in developed economics. (You only require to give overall trends, specific examples).

  Hedging risk in risk-management division

If resulting profits are repatriated to production unit in Canada monthly, what risk does this production unit face? How might it hedge this risk?

  Prepare a 20x8 consolidated income statement

Assume that Go-med is a joint venture owned by Insure and four other venturers, that the acquisition differentials are valid, and that it has not yet adopted IFRS 11: Joint Arrangements.  Prepare a 20X8 consolidated income statement for Insure using ..

  Make of statement of stockholders'' equity

Make of statement of stockholders' equity and A company had the following balances in its stockholders' equity accounts at December

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Computation of contract investment realization

Computation of Contract Investment realization and definition of the term hedging and You hold the option until the expiration date when IBM stock

  Computed of future value of a bond and preferred stock

Computed of Future value of a bond and discussion on preferred stock, risk free rate, Beta, NPV, cost of debt,IRR.

  Computation of cost of equity using constant growth rate

Computation of cost of equity using constant growth rate and The constant growth rate dividend capitalization model approach

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd