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What is mcfrugal degree of operating leverage at a sales

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Reference no: EM131141993

McFrugal, Inc. has expected sales of $20 million. Fixed operating costs are $2.5 million, and the variable cost ratio is 65 percent. Mcfrugal has outstanding a $12 million, 8 percent bank loan. The firm also has outstanding 1 million shares of common stock ($1 par value). McFrugal’s tax rate is 40 percent.

a. What is McFrugal’s degree of operating leverage at a sales level of $20 million? 

b. What is McFrugal’s current degree of financial leverage? 

C. Forecast McFrugal’s EPS if sales drop to $15 million.

Reference no: EM131141993

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