What is mcgonnigals current degree of financial leverage

Assignment Help Financial Management

Reference no: EM131336875

McGonnigal, Inc., has expected sales of $40 million. Fixed operating costs are $5 million, and the variable cost ratio is 65 percent. McGonnigal has outstanding a $10 million, 10 percent bank loan and $3 million in 12 percent coupon-rate bonds.

McGonnigal has outstanding 250,000 shares of a $10 (dividend) preferred stock and 1 million shares of common stock ($1 par value). McGonnigal's average tax rate is 35 percent, and its marginal rate is 40 percent.

a. What is McGonnigal's degree of operating leverage at a sales level of $40 million?

b. What is McGonnigal's current degree of financial leverage?

c. Forecast McGonnigal's EPS if sales drop to $38 million.

Reference no: EM131336875

Questions Cloud

How does this impact the future of georgia as progressive : Write a 2 page paper detailing the steps Georgia has taken regarding prisoner Reentry. How does this impact the future of Georgia in terms of being progressive? What are some of possible issues? Is something else needed or has Georgia done enough?

Compute connelys degree of combined leverage : Compute Connely's degree of operating leverage.- Compute Connely's degree of financial leverage.- Compute Connely's degree of combined leverage.

Determine rate of condensation on a 100-mmdiameter sphere : Determine the rate of condensation on a 100-mmdiameter sphere with a surface temperature of 150°C in saturated ethylene glycol vapor at 1 atm. Approximate the liquid properties as those corresponding to saturated conditions at 373 K

What conclusion can be made about the observed difference : The value of the t-Test Statistic for the observed differences was -4.7, where the p-value is less than 0.0002. What conclusion can be made about the observed difference?

What is mcgonnigals current degree of financial leverage : What is McGonnigal's degree of operating leverage at a sales level of $40 million?- What is McGonnigal's current degree of financial leverage?

Retail-manufacturing-coca cola : Essay Read "In the Real World - Retail/Manufacturing - Coca Cola" on page 233 in the textbook, and answer the Quick Preview questions on page 234.

What will happen to eps if operating income increases : If Valcor's degree of operating leverage is 2.0 and its degree of combined leverage is 8.0, what will happen to EPS if operating income increases by 3 percent?

Staffing models and labor optimization algorithms contribute : Discuss why productivity is important, particularly in a healthcare organization. How do staffing models and labor optimization algorithms contribute towards productivity? During project management, productivity is also necessary. If a project is ..

Discuss the changes to our criminal justice system : If you were able to implement changes to our Criminal Justice System, what changes would you make? Each student is expected to examine issues facing our communities, criminal justice system, justice in America, etc.

User Account

All Pages