Compute the degree of operating leverage for the firm

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Problem 1: Albatross Airline's fixed operating costs are $5.3 million, and its variable cost ratio is 0.20. The firm has $1.7 million in bonds outstanding with a coupon interest rate of 6 percent. Albatross has 20,000 shares of preferred stock outstanding, which pays a $2.3 annual dividend. There are 100,000 shares of common stock outstanding. Revenues for the firm are $12 million, and the firm is in the 40 percent corporate income tax bracket. Compute the following for the firm. Round your answers to three decimal places.

Degree of operating leverage
Degree of financial leverage
Degree of combined leverage

Reference no: EM132968387

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