Which operating structure has greater operating leverage

Reference no: EM13703290

Aardvark Manufacturing is evaluating two different operating structures which are described below. The firm has annual interest expense of $250, common shares outstanding of 1,000, and a tax rate of 40 percent.

a) For each operating structure, calculate

(a1) EBIT and EPS at 10,000, 20,000, and 30,000 units.

(a2) the degree of operating leverage (DOL) and degree of total leverage (DTL) using 20,000 units as a base sales level.

(a3) the operating breakeven point in units.

(b) Which operating structure has greater operating leverage and business risk?

Reference no: EM13703290

Questions Cloud

Doctors without borders : My brand is "doctors without borders." Using the references you have found to learn about your chosen brand, write a 1,300 word APA style essay providing the following information without a cover page. Based on your examination, does your bran..

Bond rating agencies have invested significant sums of money : Bond rating agencies have invested significant sums of money in an effort to determine which quantitative and non-quantitative factors best predict bond defaults. Furthermore, some of the raters invest time and money to meet privately with cor..

Abc wants to use half of its earnings either to pay share : ABC wants to use half of its earnings either to pay shareholders dividends or to repurchase shares for inclusion in the firm's employee stock ownership plan. If the firm pays a cash dividend, what will be the dividend per share received by existin..

Funding through advances against receivables : Aunt Tilly's Feeds, Inc. is considering obtaining funding through advances against receivables. Total annual credit sales are $600,000, terms are net 30 days, and payment is made on an average of 30 days. Western National Bank will advance funds un..

Which operating structure has greater operating leverage : Aardvark Manufacturing is evaluating two different operating structures which are described below. The firm has annual interest expense of $250, common shares outstanding of 1,000, and a tax rate of 40 percent.

The importance of working capital : Explain the importance of working capital as it relates to the budget process in 200 to 350 words. Address the following questions in your explanation:

Due to the combined effects of forced and free convection : A horizontal flat plate is in a free stream of air at T_{\infty } = 290K and u_{\infty } = 0.05m/s. The flat plate’s length (in the direction of the free-stream velocity) is L = 2m, its width is w = 0.5m and its temperature is T = 310K. Find the tota..

Liability comparisons : Merideth Harper has invested $25,000 in Southwest Development Company. The firm has recently declared bankruptcy and has $60,000 in unpaid debts. Explain the nature of payments, if any, by Merideth in each of the following situations.

Accrual income versus cash flow for a period : Thomas Book Sales, Inc., supplies textbooks to college and university bookstores. The books are shipped with a proviso that they must be paid for within 30 days but can be returned for a full refund credit within 90 days. In 2014, Thomas shippe..

User Account

All Pages