Use at least 4 decimal places in all calculations.
Research Labs plans to sell 250,000 units at a price of $88 per unit. The variable cost per unit is $60. Fixed costs are $2,000,000. Unlimited has $4,200,000 of debt outstanding with a cost of 5%. The tax rate is 40%.
1. Calculate degree of operating leverage.
2. Calculate degree of financial leverage.
3. Calculate degree of combined leverage.
4. Calculate break-even.
5. If sales decrease by 5%, what will happen to Research Labs' earnings before taxes (EBT)?