Last year, Neptune Corporation had sales of $874,000 and paid taxes of $61,000. Because of the low interest rate environment, the firm also borrowed some money from the local bank and paid $51,000 in interest expense. In addition, the firm incurred Variable Costs and Fixed Costs of $229,000 and $238,000 respectively. If sales increase by 5%, what should be the percentage change in operating income? SET YOUR CALCULATOR TO 4 DECIMAL PLACES AND ROUND TO 2 DECIMAL PLACES AT THE END. DO NOT ENTER THE % SIGN. IF YOUR ANSWER IS 7.7011%, FOR EXAMPLE, ENTER 7.70.
12. Neptune Corporation’s interest expense increases by 60% but all other expenses and revenues stay the same. The firm’s degree of combined leverage:
Group of answer choices
will not change
it’s not possible to tell based on the information given