Homework answers / question archive / Below is Income Statement information for Claire's Cabinets Limited Revenue: $3,107,262 Variable costs: 30% of revenue Fixed costs: $1,000,000 Depreciation: $475,000 Bond Issue A: $300,000 face value, 10% coupon Bond Issue B: $500,000 face value, 8% coupon Bond Issue C: $900,000 face value, 12% coupon Tax rate: 40% Common shares issued and Outstanding: 250,000 Calculate the degree of operating leverage for the firm

Below is Income Statement information for Claire's Cabinets Limited Revenue: $3,107,262 Variable costs: 30% of revenue Fixed costs: $1,000,000 Depreciation: $475,000 Bond Issue A: $300,000 face value, 10% coupon Bond Issue B: $500,000 face value, 8% coupon Bond Issue C: $900,000 face value, 12% coupon Tax rate: 40% Common shares issued and Outstanding: 250,000 Calculate the degree of operating leverage for the firm

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Below is Income Statement information for Claire's Cabinets Limited Revenue: $3,107,262

Variable costs: 30% of revenue

Fixed costs: $1,000,000

Depreciation: $475,000

Bond Issue A: $300,000 face value, 10% coupon Bond Issue B: $500,000 face value, 8% coupon Bond Issue C: $900,000 face value, 12% coupon Tax rate: 40%

Common shares issued and Outstanding: 250,000

1. Calculate the degree of operating leverage for the firm. (2 marks)
2. Calculate the degree of financial leverage for the firm. (2 marks)
3. Calculate the degree of combined leverage for the firm. (2 marks)
4. If the company is able to increase their sales by 15%, what percentage increase in EPS would you expect to
5. observe? (2 marks)
6. If the company's sales increase by 15%, what will the new EPS be? (2 marks)
7. If the company's sales decrease by 12%, what will the new EPS be? (2 marks)
8. If EBIT increases by 5%, what will the new EPS be? (2 marks)
9. If the company's sales decrease by 7%, what will the new EBIT be? (2 marks)