Company X wants to create additional supply development space. The additional space will cost $450,000. The expansion can be financed either by bonds at an interest rate of 8%, or by selling 40,000 shares of common stock at $20 per share.;Current Income Statement;Sales $2,900,000;Less: Variable cost (25%) $392,000;Fixed cost 475,000;EBIT 867,000;Less: Interest expense 432,000;EBT 435,000;Less: Taxes @7% 30,450;EAT $404,550;Shares 127,000;Earnings per share $ 3.19;Lets say after the additional supply space, sales are expected to go up $109,500.;Variable cost will remain at 30% of sales, and fixed cost will go up $333,000. The tax rate is 30%.;() calculate the degree of operating leverage, the degree of financing leverage, and the degree of combined leverage before expansion.;(()) develop the income statement for two financial plans, Debt and Equity.;((())) calculate the degree of operating leverage, the degree of financial leverage, and degree of combined leverage after expansion, for the 2 financing plans.
Principles of finance
This question was answered on: Dec 18, 2020
Buy this answer for only: $15
This attachment is locked
We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free solution (Deadline assured. Flexible pricing. TurnItIn Report provided)
Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
About this QuestionSTATUS
Dec 18, 2020EXPERT
GET INSTANT HELP
We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.
You can also use these solutions:
- As a reference for in-depth understanding of the subject.
- As a source of ideas / reasoning for your own research (if properly referenced)
- For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).