It is December $31.$ Last year, Western Gas & Electric Company $($WGEC$)$ had sales of $$8,000,000,$ and it forecasts that next year's sales will be

$$8,560,000.$ Its fixed costs have been and are expected to continue to be $$1,000,000,$ and its variable cost ratio is $40\mathrm{.}00\%.$ WGEC's capital structure

consists of a $$13\mathrm{.}5$ million bank loan, on which it pays an interest rate of $6\%,$ and $300,000$ shares of common equity. The company's profits are taxed

at a marginal rate of $35\%.$

Given this data, complete the following sentences:

The percentage change in the company's sales is

The percentage change in EBIT is

The degree of operating leverage $($DOL$)$ at $$8,560,000$ is

There are several ways to use and interpret a firm's DOL value. Consider the following statement and indicate whether it accurately reflects the

meaning or an appropriate use of a firm's DOL value.

Assume that at a given sales level, a firm's DOL is $2\mathrm{.}5.$ This means that a $1\%$ change in the firm's sales will result in a corresponding

$2\mathrm{.}5\%$ change in the firm's EBIT.

True or False: This statement accurately describes a firm's DOL.