Question

Prestige has revenue of $50 million with 20% variable costs. It has $20 million of bonds financed at 6% and has fixed costs of $30 million. What is Prestige's degree of total leverage? a. 1.1. b. 2.7. c. 4.0. d. 4.5. CJD Enterprise's EPS increased from $2.00 last year to $4.00 this year with a 20% increase in sales. If CJD's degree of operating leverage is 3.0, then what is CJD's degree of financial leverage? a. 1.5. b. 1.67 c. 5.0. d. Cannot determine.

Answer 1

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ACCOUNTS latest - Microsoft Excel (Product Activation Failed) View Add-Ins Formulas Data Review - 2x = = = Dr General 11AA A Wrap Text Merge & Center $ - % 8. Insert Delete Format Conditional Format Cell Formatting as Table Styles Styles Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select Alignment Number Cells File Home Insert Page Layout % Cut Calibri Ea Copy Paste Format Painter B I U - D Clipboard Font FC396 - for EW EX EY 382 383 384 385 386 387 E Z FA FB FC FD FE FE FG FH FLE SALES VARIABLE COSTS CONTRIBUTION FIXED COSTS EBIT INTEREST EBT 30 388 389 390 391 1.2 [20 X 6%] 8.8 392 ANSWER:d DEGREE OF TOTAL LEVERAGE = CONTRIBUTION/EBT 4.5 [40/8.8] 393 394 395 396 397 398 399 400 FIFO CASH BUDGET ferences budget 45 days cycle ROE, BV MV ratio VARIANCE BEP, OL FL ratios DETROIT float B-S profit loss SALES BUDGET dupont DIFF ANALYSIS BO. ovel 130% Rea - O -+ ODER 1992 * 4 OENG 04-11-2019

- 2x Insert Delete Format Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select Cells T FB FC FD FE FE FG FH FLE ACCOUNTS latest - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Calibri -11AA = = = Dr Wrap Text General Ea Copy Paste B I Format Painter U - D A Merge & Center $ - % Conditional Format 8.9 Cell Formatting as Table Styles Clipboard Font Alignment Number Styles FA412 fev EW EX EY Formula Bar FA 394 395 396 % INCREASE IN EPS = CHANGE IN EPS/BASE EPS 397 % INCREASE IN EPS = (4-2)/2 398 % INCREASE IN EPS = 100% 399 % INCREASE IN SALES = 20% GIVEN 401 402 DEGREE OF TOTAL LEVERAGE = % CHANGE IN EPS/%CHANGE IN SALES 403 100%/20% 400 404 405 406 DEGREE OF OPERATING LEVERAGE = 407 408 409 DEGREE OF TOTAL LEVERAGE = DEGREE OF OPERATING LEVERAGE X DEGREE OF FINANCIAL LEVERAGE 5 = 3 X DEGREE OF FINANCIAL LEVERAGE 1.67 = DEGREE OF FINANCIAL LEVERAGE ANSWER:b 410 411 412 FIFO CASH BUDGET ferences budget 45 days cycle ROE, BV MV ratio VARIANCE BEP, OL FL ratios DETROIT float B-S profit loss SALES BUDGET dupont DIFF ANALYSIS BO. ovel 130% Rea - O ODER 1992 * 4 OENG 04-11-2019