Operating breakeven point and financial breakeven point

Assignment Help Finance Basics
Reference no: EM131005174

1. Analysts have evaluated the Wright Sign Company and discovered that when sales are $400,000, EBIT equals $125,000, the company's degree of operating leverage (DOL) is 2.0, its degree of financial leverage (DFL) is 4.0, and EPS equals $2.50. According to this information, what will Wright's EBIT be if sales actually equal $360,000 rather than $400,000? What will the EPS be?

2. LPM Corporation sells its product for $10 each. Fixed operating costs equal $100,000, and variable operating costs are 75 percent of the selling price. The firm pays $37,500 in interest, and its marginal tax rate is 35 percent.

(a) What are LPM's operating breakeven point and financial breakeven point?

(b) If LPM expects to sell 65,000 units, what are its degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of total leverage (DTL)?

Reference no: EM131005174

Questions Cloud

Constantly adjusting to changes in both supply-demand : The markets for natural resources such as copper are constantly adjusting to changes in both supply and demand. How would your argument in part a change if, instead of the mine closures being unanticipated, it was actually easy to see the closures co..
Which concepts are most applicable to each scenario : Decide which of the following concepts are most applicable to each scenario: differential reinforcement of other behavior, avoidance contingency, punishment by prevention of reinforcer, punishment by loss of reinforcer, or avoidance of loss
How externalities both external costs and external benefits : With the aid of diagrams explain how externalities (both external costs and external benefits) can generate market failure.
Consider a competitive market characterized : Consider a competitive market characterized by the following supply and demand formulas: Demand: P = 105 - 0.25QD Supply: P = 0.275QS (a) Show the supply and demand curves and the equilibrium price and quantity in this market in a diagram. (b) With t..
Operating breakeven point and financial breakeven point : LPM Corporation sells its product for $10 each. Fixed operating costs equal $100,000, and variable operating costs are 75 percent of the selling price. The firm pays $37,500 in interest, and its marginal tax rate is 35 percent. What are LPM's oper..
With the aid of supply and demand diagrams : At the beginning of the 20th century almost two out of every five working Americans worked in agriculture. Today this number has fallen to less than one in fifty. At the same time, the total value of agricultural production represents an ever smaller..
List the key nonprice determinants of demand : List the key nonprice determinants of demand and also explain exactly how each of these affects demand. List the key nonprice determinants supply and also explain exactly how each of these affects supply.
Diagrams demonstrate that any effectve price controls : With the aid of diagrams demonstrate that any effectve price controls in a market will reduce the actual quantity bought and sold in that market.
How they apply to personality and behavior : Create a 2- to 3-page brochure including graphics, on traditional psychodynamic theories. Describe personality. Discuss the main tenets of each theory, how they apply to personality and behavior, and the strengths and limitations of each theory

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd