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vovangra [49]
3 years ago
12

A​ 20% increase in sales causes EPS to rise from​ $4.00 to​$6.50. Assuming the firm has no​ debt, what is its degree of operatin

g leverage​ (DOL)?
A. 3.13 B. 2.25 C. 1.50 D. 1.57 E. 1.00
Business
1 answer:
Anna [14]3 years ago
5 0

Answer:

A

Explanation:

DOL =  Percentage change in EBIT / percentage change in sales

EPS = {(EBIT - Interest) × (1 - T) } / Shares

The firm has no debt, so interest would be zero

EPS = EBIT × (1 - T) / Shares.

Tax rate and number of outstanding shares remain unchanged.

Percentage Change in EPS = EBIT.

Percentage Change in EPS = (6.5 / 4) - 1 = 0.625 = 62.5%

EBIT = 62.5%

Percentage change in sales= 20%

DOL =  62.5% / 20% =  3.13

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Answer:

If the company process further the units, income will decrease by $600.

Explanation:

Giving the following information:

A company has a process that results in 1,300 pounds of Product A that can be sold for $13.00 per pound.

An alternative would be to process Product A further for $13,600 and then sell it for $23.00 per pound.

We need to determine the result of further processing the product.

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Continue processing:

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McDonald's major distribution partner, The Martin-Brower Company, needs at least $1 million to build a new warehouse in Medicine
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Answer:

No it wont have enough money to build a warehouse in two years.

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Firstly we are given that the warehouse is $1 million so the company needs to save this amount of money in two years time.

We know that the company has invested $500000 to date therefore we need to calculate if this $50000 per quarter investment will cover the the other portion for $500000 to meet the warehouse cost of $1 million so we will use the future value annuity formula to calculate this which is :

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