Forty South Ltd has determined that if its revenue was to increase by 10 per cent, then EBIT would increase by 23 per cent to $130 000. The fixed costs (cash only) for the company are $99 000. The cost of capital is 10 percent

1) Given the same 10 per cent increase in revenue, what would be the corresponding change in EBITDA.

2) Briefly explain the difference between the degree of pre-tax cash flow operating leverage and the degree of accounting operating leverage. Also, explain why a corporate decision-maker might be more interested in the cash-flow metric.