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The Sterling Tire Company's income statement for 20XX is as follows: STERLING TIRE COMPANY Income Statement Year ended December 31, 20XX Sales (25,000 tires at

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The Sterling Tire Company's income statement for 20XX is as follows: STERLING TIRE COMPANY Income Statement Year ended December 31, 20XX Sales (25,000 tires at $40 each) Less: Variable costs (25,000 tires at $15) $ 1,000,000 375,000 Contribution margin Les3: Fixed costs 625,000 500,000 Earnings before interest and taxes (EBIT) Interest expense 125,000 75,000 Earnings before taxes (EBT) Income tax expense (409) 50,000 20,000 Earnings after taxes (EAT) 30,000 Given this income statement, compute the following: a. Degree of operating leverage (Round the final answer to 2 decimal places.) DOL b. Degree of financial leverage. (Round the final answer to 2 decimal places.) 0-1. Degree of combined leverage (Do not round the intermediate calculations. Round the final answer to 2 decimal places.) DCL c-2. Using your answers to a. and b, calculate the percentage increase in EBIT and EBT from a 20 percent increase in sales volume. (Do not round the intermediate calculations. Round the final answers to 2 decimal places.) EBIT c-3. Does financial or operating leverage have the greater impact? ODOL O DEL d. Break-even point in units. (Round the final answer to the nearest whole number.) Break-even point tires e. Break-even point considering the interest expense as a fixed cost Break-even point tires

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