McDurham has sales of $400 million. Fixed operating costs are $95 million, and the variable cost ratio is 45 percent. McDurham has outstanding a $100 million, 11 percent bank loan and $130 million in 12 percent coupon-rate bonds. McDurham has outstanding 250,000 shares of preferred stock with a $7 dividend and 10 million shares of common stock. McDurhams tax rate is 35 percent. What is McDurhams degree of operating leverage at a sales level of $400 million?

What is McDurhams degree of financial leverage?

Forecast McDurhams EPS if sales drop to $380 million: