Degree of operating leverage at given level of output

Assignment Help Financial Management

Reference no: EM131085573

Consider a four-year project with the following information: initial fixed asset investment = $500,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $35; variable costs = $26; fixed costs = $200,000; quantity sold = 80,000 units; tax rate = 35 percent.

What is the degree of operating leverage at the given level of output? (round answer to 4 decimal places)

Reference no: EM131085573

Questions Cloud

The projects are mutually exclusive : Project X and project Y have a cost of $50,000,000 today. Project X will have a cash flows of $20,000,000 per year for three years while Project Y will have cash flows of $18,000,000 the first year,$19,000,000 the second year and $23,000,000 the thir..

Determine the fair value of the company stock : A company paid a dividend of $0.40 and dividends are paid once a year. Dividends are expected to grow at 4 percent p.a. for each of the next five years and then to remain constant forever. Assume required rate of return of 7 percent p.a., and that di..

Effective cost of borrowing : Your firm has an average collection period of 21 days. Current practice is to factor all receivables immediately at a discount of 1.1 percent. What is the effective cost of borrowing in this case?

Neither be accepted if the projects are mutually exclusive : Project A and project B have a cost of 424,000,000 today. Project A will have cash flows of $10,000,000 per year for three years, while Project B will have cash flows of $15,000,000 the first year.$10,000,000 the second year ,and $17,000,000 the thir..

Degree of operating leverage at given level of output : Consider a four-year project with the following information: initial fixed asset investment = $500,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $35; variable costs = $26; fixed costs = $200,000; quantit..

Effective cost of borrowing in case : Your firm has an average collection period of 28 days. Current practice is to factor all receivables immediately at a discount of 1.8 percent. What is the effective cost of borrowing in this case?

Company repayment be if you issue the coupon bonds : Suppose your company needs to raise $35 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 8 percent, and you’re evaluating two issue alternatives: How many of the coupon bonds would yo..

Compare the risk of the cd with the risk of the bond : Grandpa Russ thinks he needs a fixed income for the next 10 years. He currently has $10,000 in CDs, which are maturing at the end of this month. The CDs can be renewed for one year at 4.5 percent. What is the maximum price you should tell Grandpa to ..

User Account

All Pages