QUESTION 43A company with a Degree of Financial Leverage of 2.0 means:A. For every 1% increase in Operating Income, Earnings Per Share would increase 0%B. For every 1% increase in Operating Income, Earnings Per Share would increase 3%C. For every 1% increase in Operating Income, Earnings Per Share would increase 2%O The Giants will win the Super BowlQUESTION 44For a company with a Degree of Operating Leverage of 3.5:OA. A. For every 1% increase in production and sales, Earnings Per Share would increase 3.5%B. B. For every 1% increase in production and sales, Operating Income would increase 3.5%Oc.C. For every 1% increase in production and sales, Net Income would increase 3.5%D. D. The Yankees will win the World SeriesQUESTION 45To reduce the overall risk of a company, the CEO should seek out acquisitions that are:OA. A. Highly correlated to their existing businessB. B. Negatively correlated to their existing businessOc.c. Buy US Treasury BondsOD. D. None of the above

Degree of financial leverage = % change in net income / % change in EBIT

QUESTION 43 A company with a Degree of Financial Leverage of 2.0 means: O A. For every 1% increase in Operating Income, Earnings Per Share would increase 0% O B. For every 19% increase in Operating Income, Earnings Per Share would increase 3% O C. For every 19% increase in Operating Income, Earnings Per Share would increase 2% The Giants will win the Super Bowl QUESTION 44 For a company with a Degree of Operating Leverage of 3.5: OA. A. For every 1% increase in production and sales, Earnings Per Share would increase 3.5% OB. B. For every 1% increase in production and sales, Operating Income would increase 3.5% Oc.C. For every 1% increase in production and sales, Net Income would increase 3.5% OD.D. The Yankees will win the World Series QUESTION 45 To reduce the overall risk of a company, the CEO should seek out acquisitions that are: OA. A. Highly correlated to their existing business B. B. Negatively correlated to their existing business Oc.C. Buy US Treasury Bonds OD. D. None of the above

QUESTION 43 A company with a Degree of Financial Leverage of 2.0 means: O A. For every 1% increase in Operating Income, Earnings Per Share would increase 0% O B. For every 19% increase in Operating Income, Earnings Per Share would increase 3% O C. For every 19% increase in Operating Income, Earnings Per Share would increase 2% The Giants will win the Super Bowl QUESTION 44 For a company with a Degree of Operating Leverage of 3.5: OA. A. For every 1% increase in production and sales, Earnings Per Share would increase 3.5% OB. B. For every 1% increase in production and sales, Operating Income would increase 3.5% Oc.C. For every 1% increase in production and sales, Net Income would increase 3.5% OD.D. The Yankees will win the World Series QUESTION 45 To reduce the overall risk of a company, the CEO should seek out acquisitions that are: OA. A. Highly correlated to their existing business B. B. Negatively correlated to their existing business Oc.C. Buy US Treasury Bonds OD. D. None of the above

Financial & Managerial Accounting

13th Edition

ISBN:9781285866307

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter22: Performance Evaluation Using Variances From Standard Costs

Section: Chapter Questions

Problem 22.2CP

See similar textbooks

Similar questions

Question: 5 (Marks 10) XYZ company expects in the coming year: sales of 40,000 units at $10 per unit, variable operating costs of $4 per unit, fixed operating costs of $30,000, interest of $50,000, and preferred stock dividends of $24,000. The Company is in the 40% tax bracket. Compute the following and explain their meaning: - Degree of Operating Leverage (DOL) - Degree of Financial Leverage (DFL) - Degree of Total Leverage (DTL) If XYZ company’s Earnings Per Share (EPS) is currently $7.2, estimate its EPS in case of a 10% increase in EBIT.
Ch 9. Use the following information for Question 22 and 23. The newspaper reported last week that SunRise Enterprises earned $34.19 million this year. The report also stated that the firm’s return on equity is 13 percent. The firm retains 85 percent of its earnings. What will next year's earnings be? Round to the nearest dollar and format as "XX,XXX,XXX"
#18 Scottie Company’s degree of operating leverage is 1.5. Erstadt Corporation’s degree of operating leverage is 4.5. Erstadt’s earnings would go up (or down) by ________ as much as Scottie’s with an equal increase (or decrease) in sales.
which one is correct answer please confirm? QUESTION 38 A DFL (degree of financial leverage) of 3.0 indicates a 27% increase in EPS is the result of a(n) ____ increase in EBIT. a. 3% b. 6% c. 9% d. 81%
Ch. 16. ABC Company is currently an unlevered firm. The company expects to generate $152.3 in earnings before EBIT in perpetuity. The corporate tax rate is 21 percent, implying after tax earnings of $120.32. All earnings after tax are paid out as dividends. The firm is considering a capital restructuring to allow $228 of debt. Its cost of debt capital is 10 percent. Unlevered firms in the same industry have a cost of equity capital of 15 percent. What is the new value of ABC Company? Round to the nearest cent and format as "XXX.XX"
Ch 9. Use the following information for Question 22 and 23. The newspaper reported last week that SunRise Enterprises earned $30.87 million this year. The report also stated that the firm’s return on equity is 13 percent. The firm retains 85 percent of its earnings. What is the firm's earnings growth rate? Format as a percentage as "XX.XX"
30 Statements:I. An internal rate of return that is greater than the cost of capital ensures that the company earns above its required return.II. This (I) results to greater value of the company and therefore the wealth of its owners. Group of answer choices Statement II is true. Both statements are true Both statements are false Statement I is true
Module 6 Question 2 (Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield 8.00 percent while the borrowing firm's corporate tax rate is 34 percent. b. Common stock for a firm that paid a $1.05 dividend last year. The dividends are expected to grow at a rate of 5.0 percent per year into the foreseeable future. The price of this stock is now $25.00. c. A bond that has a $1,000 par value and a coupon interest rate of 12.0 percent with interest paid semiannually. A new issue would sell for $1,150 per bond and mature in 20 years. The firm's tax rate is 34 percent. d. A preferred stock paying a dividend of 7.0 percent on a $100 par value. If a new issue is offered, the shares would sell for $85.00 per share. a. The after-tax cost of debt debt for the firm is ________%.
Q.The ASF Company was recently formed to manufacture a new product it has the following capital structure in market value terms Long term liabilities =6 Preferred stock =3 Common stock =8 Total =17 The company marginal tax rate of 40 % with interest expense per month 1. Dividend rate on preferred is 9% with per value of 1000 flotation cost is 10% on per value , dividend rate on common stock is 15% with per value of 10 Market value of share is 1 5 with growth rate 10% . Required Compute the firm present weighted average cost of capital?
9. 10. Question Workspace Tibbs Inc. had the following data for the most recent year: Net income = $300; Net operating profit after taxes (NOPAT) = $460; Total assets = $2,500; Short-term investments = $200; Stockholders' equity = $1,800; Total debt = $700; and Total operating capital = $2,300. What was its return on invested capital (ROIC)? Select the correct answer. a. 19.40% b. 20.00% c. 20.30% d. 20.60% e. 19.70%
MCQ'S: 6) Alpha Products maintains a capital structure of 40% debt and 60% common equity. To finance its capital budget for next year, the firm will sell $50 million of 11% debentures at par and finance the balance of its $125 million capital budget with retained earnings. Next year Alpha expects net income to grow 7% to $140 million, and dividends also are expected to increase 7% to $1.40 per share and to continue growing at that rate for the foreseeable future. The current market value of Alpha's stock is $30. If the firm has a marginal tax rate of 40%, what is its weighted cost of capital for the coming year? a.11.67% b.9.84% c.9.64% d.8.63% 7) If a firm sells assets, generating cash flows, the cost of these funds is __. a.the firm's cost of equity b.zero c.the firm's cost of cash flows d.the firm's weighted cost of capital 8) Calculate the weighted average…
QUESTION 24 Alpha Company has shown the following financial information: Sales: $4,500,000, Total assets: $1,800,000 Cost of capital: 15% Residual income: $90,000 The company’s return on investment is: A. 15% B. 18% C. 10% D. 12% E. 20%