Oak Barrel Company Has Net Operating Income of $10 Million

question 82

Multiple Choice

Oak Barrel Company has net operating income of $10 million.Further,the company has $80 million of debt outstanding with a required rate of return of 7 percent; the required rate of return on the industry is 12 percent; and the corporate tax rate is 35 percent.What is the gain from leverage if the personal tax rate on stock income is 15 percent and the personal tax rate on debt income is 30 percent?

• A) $22.34 million
• B) $19.41 million
• C) $16.86 million
• D) $12.19 million

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Definitions:

Utilization

Measures how effectively a company or production unit is using its resources or capacity to generate output.

Forward Scheduling

Scheduling that begins the schedule as soon as the requirements are known.

Customer Due Dates

The specified dates by which a product or service must be delivered to the customer, often impacting satisfaction and retention.

Process-Focused Facilities

Facilities designed to manage and improve processes that are not product-specific but rather focused on the sequence of operations to be performed, often requiring specialized equipment or skills.