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Albatross Airlines’ fixed operating costs are $5.8 million, and its variable cost ratio is 0.20. The...

Albatross Airlines’ fixed operating costs are $5.8 million, and its variable cost ratio is 0.20. The firm has $2 million in bonds outstanding with a coupon interest rate of 8 percent. Albatross has 300,000 shares of common stock outstanding. Revenues for the firm are $8 million, and the firm is in the 40 percent corporate income tax bracket. Compute the degree of operating leverage for the firm.

Using the information in the previous question, calculate the degree of financial leverage for Albatross Airlines.

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Calculations of operating leverage and financial leverage:

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jeff jeffy answered 2 years ago
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