Use the Below Information to Answer the Following Question Refer to the Table

question 5

Multiple Choice

Use the below information to answer the following question.
$\begin{array}{ll} \text {Sales (1,000 units) }&\$200,000\\ \text {Variable costs }&110,000\\\text { Contribution margin } & 90,000 \\\text { Fixed manufacturing costs } & 40,000\\\text { Operating income } & 50,000 \\\text { Interest } & 10,000\\\text { Earnings before taxes } & 40,000 \\\text { Taxes }(30 \%) & 12,000\\ \text {Net income }&\$28,000\\ \text {Shares Outstanding }&1,000\\\end{array}$
Refer to the table. The degree of combined leverage (DCL) is ________.

• A) 3.08x
• B) 5.45x
• C) 2.25x
• D) 6.83x

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Definitions:

Direct Quote

A representation of the amount of foreign currency required to buy or sell one unit of the domestic currency in the foreign exchange markets.

Country C's Currency

The legal tender issued by a sovereign government or central authority of country C.

Country D's Currency

The official currency issued and used for financial transactions in Country D.

Hedged Position

Adopting an investment strategy that minimizes the risk of adverse price movements in an asset, typically through the use of derivatives.