The current income statement for Halifax Tire Inc. is provided below.

Sales $8,000,000

Variable Costs 2,500,000

Fixed Costs 3,000,000

Depreciation 400,000

EBIT 2,100,000

Interest ($10,000,000 at 9%) 900,000

EBT 1,200,000

Tax (at 40%) 480,000

Earnings After Tax (Net Income) 720,000

a) Calculate the degree of operating leverage.

b) Calculate the degree of financial leverage.

c) Calculate the degree of combined leverage.

d) What percentage change in EBIT would result from a 10% decrease in sales? What percentage change in EPS would result from a 10% decrease in sales?

e) Assuming the company has 200,000 shares issued and outstanding. What would the new EPS be if sales decreased by 10%?