The following information pertains to the Bees Burger Restaurant chain:

Sales $600,000

Variable costs 300,000

Total contribution margin 300,000

Fixed costs 100,000

EBIT 200,000

Interest expense 50,000

Earnings before taxes 150,000

Taxes (30%) 45,000

Net income $105,000

1. If sales increase by 10%, what will be the new level of EPS if the firm has

100,000 shares outstanding?

2. What creates total or combined leverage in a firms capital structure?