Change in sales = (4.85 - 3.45)/3.45 = 40.58%
Degree of Operating Leverage = 0.83/0.4058
Degree of Operating Leverage = 2.05
Suppose a firm's profits increase 83 percent after sales change from $3.45 million to $4.85 million....
Suppose a firm's profits increase 81 percent after sales change from $3.35 million to $4.3 million. What is the firm's degree of operating leverage (DOL)? Round your answer to two decimal places.
You estimate that your sheep farm will generate 0.7 million of profits on sales of 4.9 million under normal economic conditions, and that the degree of operating leverage is 4.6. What will profits be if sales turn out to be 5.1 million? Enter your answer in millions, rounded to two decimal places.
The next question after is "Estimate the new operating income if total sales increase by 10%?" Imagination Park competes with Splash World by providing a variety of rides. Imagination Park sells tickets at $90 per person as a one-day entrance fee. Variable costs are $18 per person, and fixed costs are $464,400 per month. The breakeven number of tickets is 6,450. If Imagination Park expects to sell 7,700 tickets, compute the degree of operating leverage (round to two decimal places)....
Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows: Sales$5,100,000Variable costs (50% of sales)2,550,000Fixed costs1,810,000Earnings before interest and taxes (EBIT)$740,000Interest (10% cost)220,000Earnings before taxes (EBT)$520,000Tax (35%)182,000Earnings after taxes (EAT)$338,000Shares of common stock210,000Earnings per share$1.61 The company is currently financed with 50 percent debt and 50 percent equity (common stock, par value of $10). In order to expand the facilities, Mr. Delsing estimates a need for $2.1 million in additional financing. His investment banker has...
Suppose that there are two firms operating in a market. Suppose that the degree of operating leverage for Firm 1 is DOL= 1.5 while the degree of operating leverage for Firm 2 is DOL=2 How much would the profits of each firm change if both firms experienced an increase in quantity sold of 10%? Suppose instead that each firm experiences a 5% decrease in quantity sold. What would happen to the profits of each firm? Which firm’s profits are more sensitive to...
Atech has fixed costs of $12.0 million and profits of $5 million. Its competitor, ZTech, is roughly the same size and this year earned the same profits, $5 million. However, ZTech operates with fixed costs of $0.40 million and lower variable costs a. Calculate the operating leverage for each firm. (Round your answers to 2 decimal places.) DOL ATech DOL ZTech b. Which firm will likely have higher profits if the economy strengthens? ATech ZTech
Operating Leverage. You estimate that your cattle farm will generate $1 million of profits on sales of $4 million under normal economic conditions, and that the degree of operating leverage is 7.5. What will profits be if sales turn out to be $3.5 million? What if they are $4.5 million?
A project currently generates sales of $6.5 million, variable costs equal to 47% of sales, and fixed costs of $1.5 million. The firm's tax rate is 35%. What are the effects of the following changes on after-tax profits and cash flows? a. Sales increase from $6.5 million to $8.5 million. What are the effects on after-tax profits and cash flows? (Round your answers to 3 decimal places. Enter your answers in millions of dollars.) After-tax profits increase by Sn/r million...
Need help with this please. Atech has fixed costs of $4.2 million and profits of $2 million. Its competitor, ZTech, is roughly the same size and this year earned the same profits, $2 million. However, ZTech operates with fixed costs of $1.10 million and lower variable costs. a. Calculate the operating leverage for each firm. (Round your answers to 2 decimal places.) DOL ATech DOL ZTech b. Which firm will likely have higher profits if the economy strengthens? ATech ZTech
The following sales and cost data (in thousands) are for two companies in the transportation Industry: Sales Variable costs Contribution margin Fixed costs Operating profit Company A Percent of Amount Sales $100,000 1000 50,000 50 $ 50,000 504 15,000 $ 35,000 Company B Percent of Amount Sales $100,000 1000 30,000 $70,000 40,000 $ 30,000 Required: 1-a. Calculate the degree of operating leverage (DOL) for each company. 1-b. If sales increase from the present level, which company benefits more? 2. Assume...