Delta Ltd produces one product, an angle grinder. Last year, 50000 grinders were sold at...
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Delta Ltd produces one product, an angle grinder. Last year, grinders were sold at N$ each. Deltas income statement for the year ended December st is as follows: Delta Ltd Income Statement for the year ended December st N$ N$ Sales Less variable costs Fixed costs EBIT Less interest Net income before tax Income tax at Net income Earnings per share shares Delta is considering changing to a new production process in from manufacturing the grinders. Highly automated and capital intensive, the new process will double fixed costs to N$ but will decrease variable costs to N$ per unit. If the new equipment is financed with bonds, interest will increase by N$; if it is financed by common stock ordinary shares total stock outstanding will increase by shares. Calculate the degree of operating leverage DOL for Delta Ltds level of sales to decimal place
Delta Ltd produces one product, an angle grinder. Last year, grinders were sold at N$ each. Deltas income statement for the year ended December st is as follows:
Delta Ltd Income Statement for the year ended December st
N$ N$
Sales
Less variable costs
Fixed costs
EBIT
Less interest
Net income before tax
Income tax at
Net income
Earnings per share shares
Delta is considering changing to a new production process in from manufacturing the grinders. Highly automated and capital intensive, the new process will double fixed costs to N$ but will decrease variable costs to N$ per unit. If the new equipment is financed with bonds, interest will increase by N$; if it is financed by common stock ordinary shares total stock outstanding will increase by shares.
Calculate the degree of operating leverage DOL for Delta Ltds level of sales to decimal place
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