Answer:
1. expected to be the same
2. expected decrease to 1.11
3. expected decrease to 2.67
Explanation:
1. Degree of Operating Leverage = Contribution margin ÷ Earning before interest and tax
= $48,000,000 ÷ $20,000,000
= $2.40
2. Degree of Financial Leverage = Earning before interest and tax ÷ Earning before tax
= $20,000,000 ÷ $16,000,000
= $1.25
3. Degree of total leverage = Contribution margin ÷ Earning before tax
= $48,000,000 ÷ $16,000,000
= $3.00
The repayment 50% of bank loan
1. The Degree of Operating Leverage is expected to be the same.
2. Degree of Financial Leverage = $20,000,000 ÷ $18,000,000 = 1.11
The Degree of Financial Leverage is expected to be decrease to 1.11
3. Degree of total leverage = $48,000,000 ÷ $18,000,000 = 2.67
The Degree of total leverage is expected that it will decrease to 2.67
