3. The following is information for three local auto dealers:Average Selling PriceUnit SalesInterest ExpenseVariable Costs (% of Sales)Fixed CostsPreferred DividendsCommon SharesBell'sDomestics$38,1151,485816,75060%9,900,000990,0004,500,000Junior'sUsed$29,403$32,6701,8321,2381,089,0003,267,0001,633,50045%40%48%6,930,000 19,800,000 10,890,0000594,000297,0007,200,000 2,700,000 6,300,000Europe'sBest$56,628842IndustryAveragea. Using the information given in the above table, construct incomestatements for each company and the industry average. Assume thateach company faces a tax rate of 35%.b. Calculate the break-even points and the degrees of operating,financial, and combined leverage for each company and the industryaverage.c. Compare the companies to each other and the industry average. Whatconclusions can you draw about each operation?

Given in the question: Domestics Used Best Average Average Selling Price…

a. Using the information given in the above table, construct income statements for each company and the industry average. Assume that each company faces a tax rate of 35%. b. Calculate the break-even points and the degrees of operating, financial, and combined leverage for each company and the industry average. Compare the companies to each other and the industry average. What conclusions can you draw about each operation?

a. Using the information given in the above table, construct income statements for each company and the industry average. Assume that each company faces a tax rate of 35%. b. Calculate the break-even points and the degrees of operating, financial, and combined leverage for each company and the industry average. Compare the companies to each other and the industry average. What conclusions can you draw about each operation?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 87PSB

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