Explore BrainMass
Share

Explore BrainMass

    Glynn Enterprises and Monroe, Inc. both produce fluid contro

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Glynn Enterprises and Monroe, Inc. both produce fluid control products. Their financial information is as follows:

    Capital Structure
    Glynn Monroe

    Debt @ 10%................................. $1,500,000 0
    Common stock, 10 per share................ 500,000 $2,000,000
    __________ __________
    $2,000,000 $2,000,000

    Common shares..................................50,000 200,000

    Operating Plan

    Sales (200,000 units at $5 each)............$1,000,000 $1,000,000
    Less: Variable costs...................... 600,000 200,000
    ($3 per unit) ($1 per unit)

    Fixed costs....................____________0_ __ 400,000_
    Earnings before interest and taxes (EBIT $400,000 $400,000

    a. If you combine Glynn's capital structure with Monroe's operating plan, what is the degree of combined leverage?

    b. If you combine Monroe's capital structure with Glynn's operating plan, what is the degree of combined leverage?

    c. Explain why you got the results you did in Parts A and B.

    d. In Part B, if sales double, by what percent will EPS increase?

    © BrainMass Inc. brainmass.com October 10, 2019, 12:37 am ad1c9bdddf
    https://brainmass.com/economics/finance/glynn-enterprises-monroe-produce-fluid-control-299336

    Solution Preview

    Glynn Enterprises and Monroe, Inc., both produce fluid control products. Their financial information is as follows:

    Capital Structure

    Glynn Monroe
    Debt @ 10% $1,500,000 0
    Common stock, $10 per share 500,000 $2,000,000
    $2,000,000 $2,000,000
    Common shares 50,000 200,000

    Operating Plan

    Sales ...

    Solution Summary

    The solution provides detailed instructions and explanations for the problem.

    $2.19