How do financial leverage and operating leverage relate

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Reference no: EM132036636

1. How do financial leverage and operating leverage relate to one another? How are they different?

150 words,

2. The proportions of debt and equity used in calculating the weighted average cost of capital (WACC) should be ‘ideally’ based on the current _______ weights of the individual components.

A) book value B) market value C) target value

3. Assume that there is a 40% marginal tax rate. An asset with a life of 3 years can be bought for $25,313 or leased for $10,000 per year. Funds can be borrowed at cost of 0.09 (payments of $10,000 per year).

Reference no: EM132036636

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