Problem on the operating leverage

Reference no: EM131794396

Question: How does operating leverage simultaneously

(1) make a company more risky to investors, and

(2) potentially increase the rate of return to common stockholders? Based on this, what would be a good rule of thumb to follow if you were considering a new project that would require an investment of $10,000,000, your current return of equity was 10%, and you could borrow money for the project at 7%? (In terms of expected rates of return on the project)

Reference no: EM131794396

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Problem on the operating leverage : How does operating leverage simultaneously potentially increase the rate of return to common stockholders? Based on this, what would be a good rule of thumb.

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