Compute dfl and dcl for both financing plans

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Lucys Donut shop is ready to open for business. It is estimated that the food cost (variable cost) will be 60% of sales. While fixed cost will be 300,000$. THE FIRST YEARS sales estimates $900,000. The cost to start up this restaurant will be $1,000,000. Two financing alternatives are being considered, a) 60% equity financing and 40% debt at 7%, or (b) all equity financing. Common stock can be sold at 3$ per share.

Problem A) compute break even point

Problem B) compute DOL

Problem C) compute DFL and DCL for both financing plans.

Reference no: EM132822913

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