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Albatross Airline?s fi xed operating costs are $5....

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Albatross Airline?s fi xed operating costs are $5.8 million, and its variable cost ratio is 0.20. Th e fi rm has $2 million in bonds outstanding with a coupon interest rate of 8 percent. Albatross has 30,000 shares of preferred stock outstanding, which pays a $2.00 annual dividend. There are 100,000 shares of common stock outstanding. Revenues for the firm are $8 million, and the firm is in the 40 percent corporate income tax bracket. a. Compute Albatross?s degree of operating leverage. b. Compute its degree of fi nancial leverage. c. Compute its degree of combined leverage and interpret this value.

 

Paper#11925 | Written in 18-Jul-2015

Price : $25
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