Module 6 Problems.docx - Problem1311,p.557...

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Problem 13-11, p. 557 Problem 13-16, p. 558 Problem 13-20, p. 559 Problem 14-4, p. 595 Problem 14-11, p. 597 13-11: Southland Industries has $60,000 of 16% annual interest bonds outstanding, 1,500 shares of preferred stock paying annual dividend of $5/share and 4,000 shares of common stock outstanding. Assuming that the firm has a 40% tax rate, compute earnings per share for the following levels of EBIT: a. EBIT $ 24,600 $30,600 $35,000
13-16 Firm R has sales of 100,000 units at $2.00 per unit, variable operating cost of $1.70 per unit, and fixed operating cost of $6,000. Interest of $10,000 per year Firm W has sales of 100,00 units at$2.50 per unit, variable operating cost of $1.00 per unit, and fixed operating cost of $62,500. Interest is $17,500 per year. Assume that both firms are in the 40% tax bracket. a) Compute the degree of operating, financial, and the total leverage for firm R.

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