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Khan Inc. is a small manufacturer of face masks. Last year, 50,000 masks were sold for $20 each. The income statement is as follows: Sales

  1. Khan Inc. is a small manufacturer of face masks. Last year, 50,000 masks were sold for $20 each. The income statement is as follows:

Sales 1,000,000

Less variable cost 400,000

Less fixed cost 200,000

EBIT 400,000

Less interest 125,000

EBT 275,000

Less tax 40% 110,000

EAT 165,000

EPS (100,000 shares) 1.65

Find DOL, DFL and degree of total leverage. If sales increase by 5% what effect will it have on the EPS?

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