Unformatted text preview: ting breakeven point in units.
b. Compute the degree of operating leverage (DOL) for the following unit sales
levels: 25,000, 30,000, 40,000. Use the formula given in the chapter.
c. Graph the DOL figures that you computed in part b (on the y axis) against
sales levels (on the x axis).
d. Compute the degree of operating leverage at 24,000 units; add this point to
e. What principle do your graph and figures illustrate? LG2 11–9 EPS calculations Southland Industries has $60,000 of 16% (annual interest)
bonds outstanding, 1,500 shares of preferred stock paying an annual dividend of
$5 per share, and 4,000 shares of common stock outstanding. Assuming that the
firm has a 40% tax rate, compute earnings per share (EPS) for the following levels of EBIT:
c. $35,000 LG2 11–10 Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $250,000 of 16% (annual interest) debt and 2,000
shares of common stock. The firm...
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