Albatross Airline's fixed operating costs are $5.8 million, and its variable cost ratio is 0.20.

Albatross Airline's fixed operating costs are $5.8 million, and its variable cost ratio is 0.20. The firm

has$2 million in bonds outstanding with a coupon interest rate of 8 percent. Albatross has 30,000

shares of preferred stock outstanding, which pays a $2 annual dividend? There are 100,000 shares of

common stock outstanding. Revenues for the firm are $8 million, and the firm is in the 40 percent

corporate income tax bracket.

a. Compute Albatross' degree of operating leverage.

b. Compute its degree of financial leverage.

c. Compute its degree of combined leverage and interpret this value.