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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 1,000,000 Sales (25,000 tires

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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 1,000,000 Sales (25,000 tires at $40 each) $ Less: Variable costs (25,000 tires at $15) 375,000 Contribution margin Less: Fixed costs 625,000 500,000 125,000 arnings before interest and taxes (EBIT) Interest expense 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.) 5 b. Degree of financial leverage. (Round the final answer to 2 decimal places.) 2.5 ho C-1. Degree of combined leverage. (Do not round the intermediate calculations. Round the final answer to 2 decimal places.) Choose... e c-2. Using your answers to a. and b. calculate the percentage increase in EBT from a 20 percent increase in sales volume. (Do not round the intermediate calculations. Round the final answers to 2 decimal places.) Choose... Choose... C-3. Does financial or operating leverage have the greater impact? d. Break-even point in units. (Round the final answer to the nearest whole number.) Choose... e. Break-even point considering the interest expense as a fixed cost. Choose

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