TCA Cable Has Fixed Operating Cost of $2

question 50

Multiple Choice

TCA Cable has fixed operating cost of $2.6 million, and its variable cost ratio is 0.30.TCA has $4.0 in bonds outstanding with a coupon interest rate of 12%.TCA has 1.0 million common shares and 1,000,000 shares of $1.75 preferred stock outstanding.Total revenues for TCA Cable are $14.2 million.If TCA has a marginal tax rate of 40%, what is its degree of combined leverage?

• A)2.1
• B)1.0
• C)1.9
• D)2.5

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Definitions:

Categorical Imperative

The Categorical Imperative is a foundational concept in moral philosophy introduced by Immanuel Kant, which suggests that one should act only according to that maxim through which you can at the same time will that it becomes a universal law.

Collectivists

Individuals or cultures that prioritize the goals and well-being of the group over those of the individual.

Individualists

Persons who prioritize personal goals and independence over collective goals and interdependence.

Social Norms

Implicit or explicit rules a group holds that influence how its members behave in a typical situation.