Reference no: EM132827909

Question - Belo Corporation produces a product with the following operating and financial data in 2011 and estimated sales in 2012:

Operating data

Unit sales price, 320

Unit variable costs and expenses, 270

Total fixed costs and expenses, excluding interest 2,500,000

Units sold 150,000

The company expects to increase by 20% more of its units in 2012.

Financial Data

8% bonds payable, 10,000 shares, 10 Million

10% preference shares, 100 par, 40,000 shares outstanding 4 million

Ordinary share outstanding 50,000 shares

Tax rate, 40%

Required - Compute the following leverages in 2011 and 2012

1. Degree of operating leverage

2. Degree of financial leverage

3. Degree of total leverage