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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

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.)

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.)

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

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