Victoria Inc. (VI) Has a total degree of leverage of 5 (DTL=DOL*DFL=5), if sales is expected to increase by 4 percent for VI, what is your best estimate for EPS of VI?
HI,
Degree of total leverage is a sensitivity element which calculates change in % of EPS with percentage change of Sales.
Here DTL (Degree of total leverage) = 5
% change in Sales = 4%
% change of EPS =?
DTL = % change in EPS/% change in Sales
5 = % change in EPS /4%
% change in EPS = 5*4% = 20%
Hence EPS will increase by 20%
Thanks
Victoria Inc. (VI) Has a total degree of leverage of 5 (DTL=DOL*DFL=5), if sales is expected...
Maham has a 2.5 DOL (degree of operating leverage) and a 2.0 DFL (degree of financial leverage). If it wants a 35% increase in EPS, what increase in sales does it need? a. 6% b. 7% c. 9% d. 35%
How can I determine current DOL (degree of operating leverage), DFL (degree of financial leverage), and DCL (degree of combined leverage)? If maximization of earning per share is the goal, what is the indifference EBIT (EBIT*)? Also, Once the expansion is completed, the sales are expected to increase to $5,000,000. How can I calculate the new EBIT. At the new EBIT which method of financing results in a higher EPS? Calculate EPS for both plans at this new EBIT. new...
Troy Co.'s sales increase by 15%. If Troy Co. has a degree of operating leverage (DOL) of 3.0, what is the expected change in EBIT? a. 5%. b. 15% c. 30%. d. 45%.
Tang Co.'s sales increase by 15%. If Tang Co. has a degree of operating leverage (DOL) of 3.0, what is the expected change in EBIT? а. 5% b. 15% C. 30% d. 45%
#11 Variable operating costs 45,000 Gross profit Fixed operating costs 20,000) Net operating income25,000 Interest Earnings before taxes 15,000) 10,000 4,000) 6,000 Taxes (40%) Net income Compute Surfside's degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of total leverage (DTL). 12-11 Data Recovery Systems (DRS) has a degree of operating leverage (DOL) equal to 3.2x and a degree of total leverage (DTL) equal to 8x. DRS forecasts that this year's sales will be $300,000 and that...
5. Computing and interpreting the degree of operating leverage (DOL) It is December 31. Last year, Praxis Corporation had sales of $16,000,000, and it forecasts that next year's sales will be $17,600,000. Its fixed costs have been and are expected to continue to be $1,200,000, and its variable cost ratio is 40.00%. Praxis's capital structure consists of a $13.5 million bank loan, on which it pays an interest rate of 6%, and 300,000 shares of common equity. The company's profits...
Calculate the degree of operating leverage for the company below: Total costs 275,000 Variable costs 150,000 DOL ______________ Operating Cash Flow 250,000 Expected Quantity 6,000 Actual Quantity 6,300 What is the percent increase in quantity? ______________ If quantity increases by this amount, what will be the percent increase in OCF? ______________ New OCF dollar amount __________________ New DOL at the higher quantity _________________
Company A's monthly sales is $100,000 and degree of operating leverage (DOL) is 2. In December, Company A expects that sales will reduce by $10,000. What will be the impact of this on Operating Income? Select one: A. Operating Income will reduce by 10% B. Operating Income will increase by 10% C. Operating Income will increase by 20% D. Operating Income will reduce by 20%
Exercise 9-32 Degree of Operating Leverage (DOL) (LO 9-5] Tasty Kreme and Krispy Kake are both producers of baked goods, but each has followed a different production strategy. The differences in their strategies resulted in differences in their cost structure, as shown in the following table: Estimated sales in units Unit price Variable cost per unit Total fixed costs TastyKreme Krispy Kake 28,000 27,000 8 8 5 $ 42,000 $81,000 3 Required: 1. Compute the operating income and degree of...
DFL and graphical display of financing plans Walls and Associates has EBIT of $54,000. Interest costs are $16,600, and the firm has 15,300 shares of common stock outstanding Assume a 40% tax rate a. Use the degree of financial leverage (DFL) formula to calculate the DFL for the firm. b. Using a set of EBIT-EPS axes, plot Wells and Associates' financing plan, c. If the firm also has 1,300 shares of preferred stock paying a $6.50 annual dividend per share,...