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    Capital Structure Leverage

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    The M&M Company wishes to sell 100,000 units of its new product at $15 apiece. The variable cost is $12. The company has an operating expense of $200,000. The interest payment is $20,000 and the preferred stock dividend is $30,000. Tax rate is 40%. The company also has 10,000 outstanding common stocks. Please calculate the following:

    a. Breakeven point
    b. DOL
    c. DFL
    d. DTL and
    e. The earnings per share

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    Solution Summary

    This solution discusses capital structure leverage.