The Jonhaux Company produces a product that has a contribution per unit of $40.

The Jonhaux Company produces a product that has a contribution per unit of $40.

 

The Jonhaux Company produces a product that has a contribution per unit of $40. Fixed operating costs are $140,000. The Jonhaux Company currently has $10 million of bonds outstanding with a coupon rate of 5%.

a. What is the current break-even number of units for Jonhaux con- sidering all fixed costs?

b. The board of Jonhaux is considering a proposal to issue $1 mil- lion additional bonds, with a a coupon rate of 6%. How would this proposed financing affect the break-even point?

c. If 20,000 units are produced and sold, what is the degree of operat- ing leverage, the degree of financial leverage, and the degree of total leverage under the current and proposed financial structures?

Is this the question you were looking for? If so, place your order here to get started!