Archive Storage Earned $3

question 80

Multiple Choice

Archive Storage earned $3.20 a share on sales of $13.6 million. Archive has determined that its degree of operating leverage is 1.87 and its degree of financial leverage is 2.91. If sales are expected to increase 15%, what will be the EPS forecast?

• A) $2.61
• B) $4.60
• C) $5.81
• D) $3.68

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Definitions:

Common Stock

Equity ownership in a corporation, often with voting rights, representing a claim on a portion of the company's profits.

Significant Influence

The power to participate in the financial and operating policy decisions of an investee but not control or jointly control over those policies.

Voting Stock

Shares that give the shareholder voting rights in the corporation's decisions, typically in elections for the board of directors.

Convertible Bonds

Debt securities issued by a corporation that can be converted into a specified number of shares of the corporation's stock at the option of the bondholder, typically at certain times during the bond's life.