Compare the operating leverage for the entire 2007 2009

Assignment Help Financial Management
Reference no: EM131328425

Gail and Company had the following sales and EBIT during the years 2007 through 2009.

 

2007

2008

2009

Sales ($ million)

75.2

82.7

95.1

EBIT ($ million)

26.3

30.5

36.0

a. Use the data provided to assess Gail and Company's operating leverage over the following periods (1) 2007-2008 (2) 2008-2009 (3) 2007-2009

b. Compare, contrast, and discuss the firm's operating leverage between the 2007-2008 period and the 2008-2009 period. Explain any differences.

c. Compare the operating leverage for the entire 2007-2009 period to the values found for the 2007-2008 and 2008-2009 periods and explain the differences.

Reference no: EM131328425

Questions Cloud

What is intcs cost of equity : If the beta of INTC stock equals 1.6, the risk-free rate equals 6 percent, and the expected return on the market portfolio equals 11 percent, what is INTC's cost of equity?
What is fourniers current cost of equity : If the firm shifts its capital structure to a less highly leveraged position by selling preferred stock and using the proceeds to retire debt, it expects its beta to drop to 1.20. What is its cost of equity in this case?
What does they tell us about the aztec empire : The Templo Mayor Project is excavating the center of the former Aztec capital of Tenochtitlan.
Which company had higher operating leverage : PepsiCo's operating profit was $6.44 billion in 2006 and $5.92 billion in 2005. Based on these figures, which company had higher operating leverage?
Compare the operating leverage for the entire 2007 2009 : Compare the operating leverage for the entire 2007-2009 period to the values found for the 2007-2008 and 2008-2009 periods and explain the differences.
Discuss about the eating habits and chronic diseases : Chronic diseases such as cardiovascular, obesity, and diabetes are caused by eating unhealthy food. Also, consumption of food with high-fat content can make one suffer from coronary artery diseases that lead to heart blockage which leads to death...
Balls merges with company that manages cleaning services : If there are no benefits to be gained from a merger, the acquiring company will call off the merger. Acquiring firms signal that their stock is undervalued if they use their stock to fund the acquisition. A company that produces beach balls merges wi..
Calculate the return on equity for each firm : Calculate the return on equity (ROE) for each firm, assuming the return on assets is 3 percent.- The return on assets is 7 percent.- The return on assets is 11 percent. What general pattern do you observe?
Discuss the cultural differences in diet and heart health : Despite the increased public awareness about food choices, dietary practices, and physical activity, American continues to grow fatter. Obesity rates continue to increase being called an epidemic. More than 67% of Americans are either overweight..

Reviews

Write a Review

Financial Management Questions & Answers

  What is the payback period of the ice cream cart

It will cost $4,100 to acquire a small ice cream cart. Cart sales are expected to be $3,300 a year for five years. After the five years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the pa..

  What is the rate of return on the fund

Consider a no-load mutual fund with 200 million in assets and 10 million shares at the start of the year and with 250 million in assets and 11 million shares at the end of the year. During the year investors have recieved income distributions of $2 p..

  What is its estimated value per share

The firm’s weighted average cost of capital is 11%, and it has $1,500,000 of debt at market value and $400,000 of preferred stock at its assumed market value. The estimated free cash flows over the next 5 years, 2016 through 2020, are given below. Be..

  Calculate the PV of cash inflows

A factory costs $498,400. You forecast that it will produce cash inflows of $200,074 in year 1, $155,000 in year 2, and $340,000 in year 3. The discount rate is 10.50%. Calculate the PV of cash inflows. Should the company invest in the factor?

  Expected return on the portfolio

You own a portfolio that has $3,600 invested in Stock A and $4,600 invested in Stock B. If the expected returns on these stocks are 10 percent and 13 percent, respectively, what is the expected return on the portfolio?

  What is the geometric average return

Hacker Corporation's stock produced returns of 15%, 26%, 7%, -13%, and 11% last five years. What is the arithmetic average return and the standard deviation of the stock's returns for the period? what is the geometric average return?

  What is the value of uppers shares today

The next dividend for the Upper Growth Company will be $0.50 per share. Investors require a 14% return on companies such as Upper. Upper’s dividend increases by 5% every year. Based on the dividend growth model, what is the value of Upper’s shares to..

  Comparing two different capital structures

Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 790,000 shares of stock outstanding. Under Plan II, there would be 540,000 shares of stock outstan..

  Bidding to provide web hosting services

Hassle-Free Web is bidding to provide web hosting services for hotel Lisbon. Hotel Lisbon pays its current provider $10,200 per year fo hosing its web page, handling transactions. Hassle-Free figures that it will need to purchase equipment worth $14,..

  What price will the stock reach equilibrium

A share of stock with a beta of .70 now sells for $60. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 5%, and the market risk premium is 8%. At what price will the stock reach an “equilibrium” at which it is perceived..

  Example related to the issue of reporting human capital

Discuss an example related to the issue of reporting human capital in finance statement. offering examples of human capital being measured in the organization.

  What is the expected capital gain yield

Dexter Corp. will pay a dividend of $1.44 next year. The company has stated that it will maintain a constant growth rate of 5.4% a year, forever. A. If you want a return of 13%, how much should you pay for the stock? B. What is the expected capital g..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd