Problem regarding the expert analysts resources

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Reference no: EM13994830

Smith Bottling Company (SBC) expects this year's sales to be $560,000. SBC's variable oper- ating costs are 75 percent of sales and its fixed operating costs are $90,000. SBC pays interest on its debt equal to $30,000 per year and its marginal tax rate is 35 percent. (a) Compute at SBC's DOL, DFL, and DTL. (b) If sales turn out to be $588,000 rather than $560,000, what will be SBC's EBIT and net income?

2.12-20 Expert Analysts Resources (EAR) has provided you with the following information about three companies you are currently evaluating:

Company	Degree of Operating Leverage (DOL)	Degree of Financial Leverage (DFL)
Acme	1.5X	6.0X
Apex	3.0X	4.0X
Alps	5.0X	2.0X

Which firm would be considered riskiest? Explain your answer.

Reference no: EM13994830

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