A firm has earnings per share of $2.60 at a sales level of $5 million. If the firm has a degree of operating leverage of 3.0 and a degree of financial leverage of 5.5 (both at a sales level of $5 million), forecast earnings per share for a 2 percent sales decline.
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- A firm has earnings per share of $2.15 at a sales level of $2 million. If the firm has a degree of operating leverage of 4.2 and a degree of financial leverage of 5.5 (both at a sales level of $2 million), forecast earnings per share for a 2 percent sales decline. Round your answer to the nearest cent. $Consider a retail firm with a net profit margin of 3.5%, a total asset turnover of 1.8, total assets of $44 million, and a book value of equity of $18 million.a. What is the firm’s current ROE?b. If the firm increased its net profit margin to 4%, what would its ROE be?c. If, in addition, the firm increased its revenues by 20% (while maintaining this higher profit margin and without changing its assets or liabilities), what would its ROE be?AU Inc.’s EBIT changes by 15%. The firm computed that they have a Degree of financial leverage of 2.5. What is the expected change in the earnings per share of AU Inc.?
- Consider a retail firm with a net profit margin of 3.36%, a total asset turnover of 1.88, total assets of $45.5 million, and a book value of equity of $17.6 million. a. What is the firm's current ROE? b. If the firm increased its net profit margin to 4.27%, what would be its ROE? c. If, in addition, the firm increased its revenues by 18% (maintaining this higher profit margin and without changing its assets or liabilities), what would be its ROE?Consider a retail firm with a net profit margin of 3.71%, a total asset turnover of 1.78, total assets of $45.9 million, and a book value of equity of $18.5 million. a. What is the firm's current ROE? b. If the firm increased its net profit margin to 4.60%, what would be its ROE? c. If, in addition, the firm increased its revenues by 21% (maintaining this higher profit margin and without changing its assets or liabilities), what would be its ROE? a. What is the firm's current ROE? The firm's current ROE is %. (Round to one decimal place.)Deng Inc.’s EBIT changes by 20%. The firm computed that they have a Degree of financial leverage of 3. What is the expected change in the earnings per share of Deng Inc.? A. 6% B. 6.67% C. 60% D. 66.67% Dan Corp. has a degree of financial leverage of 2. Third Corp. will experience a 75% increase in earnings per share, and it will have earnings before interest and taxes of P120,000 if sales increase by 30%. Determine the degree of operating leverage of the Dan Corp.? A. 1.25 B. 1.00 C. 1.20 D. 1.40
- A company has predicted earnings per share (EPS) of $3.74 and a degree of financial leverage of 2.4 at the predicted level of EBIT. What is the expected percentage change in EPS if EBIT turn out to be 10% lower than expected?Blue Co.’s sales increased by 10%. The firm determined the degree of total leverage at 3.0. How much is the percentage increase in Net Income? (In percentage, put percentage sign)Galleon & Sons company has a degree of operating leverage 2.15. Management expects a rise in revenues of 4%. What will be the percentage increase in operating income as a result of the increase in revenue? 1.86% 6.15% 8.60% O 10.46%
- 6. Company A maintains a debt equity ratio of 0.7, where debt is the net debt (i.e. debt minus cash). The market value of the firm's equity is $200 million, and the required returns on the firm's equity and debt are 12% and 7%. The firm's marginal tax rate is 35%. A. If the company's free cash flow next year is $7 million, and the free cash flow is expected to grow at a constant rate. What is the growth rate of the free cash flow that is consistent with the company's current value? B. What is the value of the tax shield?Consider a retail firm with a net profit margin of 3.93 %, a total asset turnover of 1.87, total assets of $42.3 million, and a book value of equity of $18.6 million.a. What is the firm's current ROE?b. If the firm increased its net profit margin to 4.58 %, what would be its ROE?c. If, in addition, the firm increased its revenues by 19 % (maintaining this higher profit margin and without changing its assets or liabilities), what would be its ROE?Assume that an average firm in the office supply business has a 6% profit margin, a 40%total liabilities/assets ratio, a total assets turnover of 2 times, and a dividend payout ratioof 40%. Is it true that if such a firm is to have any sales growth (g>0), it will be forced toborrow or to sell common stock (that is, it will need some nonspontaneous external capitaleven if g is very small)? Explain.