Question
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 @ 11% $ 900,000 0 Common stock, $10 per share 600,000 $ 1,500,000 Total $ 1,500,000 $ 1,500,000 Common shares 60,000 150,000 Operating plan Sales (55,000 units at $20 each) $ 1,100,000 $ 1,100,000 Variable costs 880,000 550,000 Fixed costs 0 305,000 Earnings before interest and taxes (EBIT) $ 220,000 $ 245,000 The variable costs for Sinclair are $16 per unit compared to $10 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 n/r incorrect 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 n/r incorrect 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 n/r incorrect %
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