Question
Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the production of tile for the home-building industry. Their financial information is as follows: Capital
Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the production of tile for the home-building industry. Their financial information is as follows:
Capital Structure | |||||
Sinclair | Boswell | ||||
Debt @ 12% | $1,320,000 | 0 | |||
Common stock, $10 per share | 880,000 | $2,200,000 | |||
$2,200,000 | $2,200,000 | ||||
Common shares | 88,000 | 220,000 | |||
Operating Plan | |||||
Sales (62,000 units at $25 each) | $1,550,000 | $1,550,000 | |||
Less: Variable costs | 1,116,000 | 744,000 | |||
($18 per unit) | ($12 per unit) | ||||
Fixed costs | 0 | 312,000 | |||
Earnings before interest and taxes (EBIT) | $434,000 | $494,000 | |||
a. If you combine Sinclairs capital structure with Boswells operating plan, what is the DCL? (Round the final answer to 2 decimal places.)
DCL X
b. If you combine Boswells capital structure with Sinclairs operating plan, what is the DCL? (Round the final answer to 2 decimal places.)
DCL X
d. In part b, if sales double, by what percentage will EPS increase?
EPS will increase by %
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