Final

Question 1

Contribution margin=

Answer 1

Sales- variable costs

Question 2

Degree of operating leverage formula?

Answer 2

Contribution Margin / EBIT

Question 3

break even point in units formula?

Answer 3

fixed costs/sales price per unit -variable price per unit

Question 4

How to find new price of stock after company issued more dividends (example x company offering a 10% stock dividend) just means they are issuing more shares.

Answer 4

old price / 1 + stock dividend percentage

Question 5

break even dollar sales volume ?

Answer 5

total fixed cost / contribution margin ratio (aka variable cost ratio)

Question 6

p/e x earning per share =

Answer 6

price of stock

Question 7

how to find increase in operating income as a result of increased sales :

Answer 7

Increase amount in operating income amount x VC ratio(vc/oldsales), subtract the difference and divide by old operating income.

Question 8

How to find increase in earnings per share as a result of increased sales :

Answer 8

(increase amount/ original EBIT) x100 then calculate DFL and multiply

Question 9

New price after stock dividend

Answer 9

old price / 1+ stock dividend %

Question 10

What do you do to find time to maturity ?

Answer 10

Find I

Question 11

Equity and Dividends are not tax deductible so you don’t have to find the after tax cost of equity

Question 12

The increased variability in earnings per share due to the firm’s use of debt financing is measured by:

Answer 12

degree of financial leverage.