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Question
Illinois Tool Company's (ITC) fixed operating costs are $1,260,000 and its variable cost ratio (i.e., variable costs as a fraction of sales) is 0.70. The firm has $3,000,000 in bonds outstanding at an interest rate of 8 percent. ITC has 30,000 shares of $5 preferred stock and 150,000 shares of common stock outstanding. ITC is in the 50 percent corporate income tax bracket. Forecasted sales for next year are $9 million. What is ITC's degree of operating leverage at a sales level of $9 million?a. 1.60
b. 1.875
c. 3.0
d. 3.33
Answer
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Related questions
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Q:
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Q:
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b. the value of the firm is independent of its capital structure in perfect capital markets with no income taxes
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Q:
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d. $3.33