Question: Faston Inc expects sales of silicon chips to be 60 million dollar this year. Because this is a very capital intensive business, fixed operating costs are 20 million dollar. The variable cost ratio is 40 percent. The firm's debt obligations consist of a $4million, 10% bank loan and a 20 million dollar bond issue with an 11% coupon rate. Faston has 1 million shares of common stock outstanding, & its marginal tax rate is 40%
[A] Calculate Faston's degree of combined leverage
[B] Calculate Faston's EPS if sales decline by 5%
[C] Calculate Faston's degree of operating leverage
[D] Calculate Faston's degree of financial leverage