Question:
A firm has sales of $10 million, variable costs of $4 million, fixed expenses of $1.5 million, interest costs of $2 million, and a 30 percent average tax rate.
a.	Compute its DOL, DFL, and DCL.
	DOL = (S VC)/(S VC FC) =
	DFL = EBIT/(EBIT I)
	DCL =
b.	What will be the expected level of EBIT and net income if next years sales rise 10 percent?
	EBIT will rise
	NI will rise
c.	What will be the expected level of EBIT and net income if next years sales fall 20 percent?
	EBIT will fall
	NI will fall