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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 Less: 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 (40%) 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. Decree of financial leverage (Round the final answer to 2 decimal places.)

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