What is the fixed-cost expenditure for a firm with a DOL of 4.5 that generates pretax profits of
$1 million and has $600,000 in depreciation expense?
$2.9 million = fixed costs
If a share of stock provided a 14.0% nominal rate of return over the previous year while the
real rate of return was 6.0%, then the inflation rate was:
7.55% = inflation rate
What is the break-even level of revenues for a firm with $6 million in sales, variable costs of
$3.9 million, fixed costs of $1.2 million, and depreciation of $1 million?
Variable costs =
million
million
$6.0
$3.9
= 65%
Break-even level of revenues =(depreciation+fixed costs)/(1-variable costs/sales)=
.65)(1
$2,200,000
−
= $6,285,714
