Telecom Cable has fixed operating cost of $2.6 million, and its variable cost ratio is 0.30. Telecom has $4.0 in bonds outstanding with a coupon interest rate of 12%. Telecom has 1.0 million common shares and 1,000,000 shares of $1.75 preferred stock outstanding. Total revenues for Telecom Cable are $14.2 million. If Telecom has a marginal tax rate of 40%.

a) What is its degree of combined leverage?

b) If sales decreased by $2M show what would happen to EBIT