Question Details

What is Marcus's degree of operating leverage in sales dollars 


 .	Quick Launch Rocket Company, a satellite launching firm, expects its sales to increase by 50 percent in the coming year as a result of NASA's recent problems with the space shuttle.  The firm's current EPS is $3.25. Its degree of operating leverage is 1.6, while its degree of financial leverage is 2.1.  What is the firm's projected EPS for the coming year using the DTL approach?

a.	$ 3.25
b.	$ 5.46
c.	$10.92
d.	$ 8.71
e.	$19.63

 .	Your firm's EPS last year was $1.00.  You expect sales to increase by 15 percent during the coming year.  If your firm has a degree of operating leverage equal to 1.25 and a degree of financial leverage equal to 3.50, then what is its expected EPS?

a.	$1.3481
b.	$1.6563
c.	$1.9813
d.	$2.2427
e.	$2.5843

 .	Stromburg Corporation makes surveillance equipment for intelligence organizations.  Its sales are $75,000,000.  Fixed costs, including research and development, are $40,000,000, while variable costs amount to 30 percent of sales.  Stromburg plans an expansion which will generate additional fixed costs of $15,000,000, decrease variable costs to 25 percent of sales, and also permit sales to increase to $100,000,000.  What is Stromburg's degree of operating leverage at the new projected sales level?

a.	3.75
b.	4.20
c.	3.50
d.	4.67
e.	3.33

 .	The "degree of leverage" concept is designed to show how changes in sales will affect EBIT and EPS.  If a 10 percent increase in sales causes EPS to increase from $1.00 to $1.50, and if the firm uses no debt, then what is its degree of operating leverage?

a.	3.6
b.	4.2
c.	4.7
d.	5.0
e.	5.5

 .	Marcus Corporation currently sells 150,000 units a year at a price of $4.00 a unit.  Its variable costs are approximately 30 percent of sales, and its fixed costs amount to 50 percent of revenues at its current output level.  Although fixed costs are based on revenues at the current output level, the cost level is fixed.  What is Marcus's degree of operating leverage in sales dollars ?

a.	1.0
b.	2.2
c.	3.5
d.	4.0
e.	5.0




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