It is December 31. Last year, Western Gas & Electric Company (WGEC) had sales of $12,000,000 and it forecasts that next year's sales will be $12,840,000. Its fixed costs have been and are expected to continue to be $1,500,000 and its variable cost ratio is 55%. WGEC's capital structure consists of a $13.5 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: 7%, 8.4%, or 6.3%?

The percentage change in EBIT is: 13.75%, 7.75%, or 9.69%?

The degree of operating leverage (DOL) at $12,840,000 is: 1.38, 0.72, or 2.04?

There are several ways to use and interpret a firms DOL value. Consider the following statement and indicate whether it accurately reflects the meaning or an appropriate use of a firms DOL value.

The decision to use capital-intensive technologies will have no effect on a firms DOL

True or False: The statement above accurately describes a firms DOL?