Economics Homework Help

Ch.4 Leverage & Capital Structure

Tri-Star Productions, Inc. is evaluating two different operating structures which are described below. The firm has annual interest expense of $250, common shares outstanding of 1,000, and a tax rate of 40 percent.

	Fixed Costs	Price per Unit	Variable Cost per Unit
operating structure 1:	$500	$1	$0.75

– calculate: