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Compute DFL and DCL for both financing plans

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Reference no: EM132840768

Question - Lucys Donut shop is ready to open for business. It is estimated that the food cost (variable cost) will be 60% of sales. While fixed cost will be 300,000.

THE FIRST YEARS sales estimates $900,000. The cost to start up this restaurant will be $1,000,000. Two financing alternatives are being considered, a) 60% equity financing and 40% debt at 7%, or (b) all equity financing. Common stock can be sold at 3$ per share.

A) Compute break-even point

B) Compute DOL?

C) Compute DFL and DCL for both financing plans.

Reference no: EM132840768

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