Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the production of brick for the homebuilding industry. Their financial information is as follows:

	Sinclair			Boswell
Capital Structure
Debt @ 10%	$	1,020,000			0
Common stock, $10 per share		680,000		$	1,700,000
Total	$	1,700,000		$	1,700,000
Common shares		68,000			170,000
Operating Plan:
Sales (57,000 units at $15 each)	$	855,000		$	855,000
Variable costs		684,000			342,000
Fixed costs		0			307,000
Earnings before interest and taxes (EBIT)	$	171,000		$	206,000

The variable costs for Sinclair are $12 per unit compared to $6 per unit for Boswell.

a.	If you combine Sinclairs capital structure with Boswells operating plan, what is the degree of combined leverage? (Round your answer to 2 decimal places.)

Degree of combined leverage

b.	If you combine Boswells capital structure with Sinclairs operating plan, what is the degree of combined leverage? (Round your answer to the nearest whole number.)

Degree of combined leverage

c.	In part b, if sales double, by what percentage will EPS increase? (Round your answer to the nearest whole percent.)

EPS will increase by

%

References