TL is December 31. Last year, Carter Chemical Co. had sales of $12,000,000, and it forecasts that next year's sales will be $11,160,000. Its fixed costs have been and are expected to continue to be $6,600,000, and its variable cost ratio is 7.50%. Carter's capital structure consists of a $13.5 million bank loan, on which it pays an interest rate of 9%, and 250,000 shares of common equity. The company's profits are taxed at a marginal rate of 40%. Given this data, complete the following sentences: The percentage change in the company's sales is The percentage change in Carter's EBIT is The degree of operating leverage (DOL) at $11,160,000 is There are several ways to use and interpret a firm's DOL value. Consider the following statement and indicate whether it accurately reflects the meaning or an appropriate use of a firm's DOL value. Assume that at a given sales level, a firm's DOL is 2.5. This means that a 1% change in the firm's sales will result in a corresponding 2.5% change in the firm's EBIT. True or False: This statement accurately describes a firm's DOL False True It is December 31. Last year, Campbell Construction had sales of $80,000,000, and it forecasts that next year's sales will be $76,000,000. Its fired costs have been--and are expected to continue to be-$40,000,000, and its variable cost ratio is 11.00%. Campbell's capital structure consists of a $15 million bank loan, on which it pays an interest rate of 8%, and 750,000 shares of common equity. The company's profits are taxed at a marginal rate of 40%. Given this data, complete the following sentences: Note: For these computations, round each EPS to two decimal places. The company's percentage change in EBIT is The percentage change in Campbell's earnings per share (EPS) is The degree of financial leverage (DFL) at $76,000,000 is_ The following are the two principal equations that can be used to calculate a firm's DFL value: DFL (at EBIT = $X) = Aronomie Predage Change in EBIT DFL (at EBIT = SX) = ET- Tube Consider the following statement about DFL, and indicate whether or not it is correct. All other factors remaining constant, the larger the proportion of common equity used by the firm in its capital structure, the smaller the firm's DFL. Sales Less: Variable costs Gross profit Less: Fixed operating costs Net operating income (EBIT) Less: Interest expense Taxable income (EBT) Less: Tax expense (40%) Net income This Year's Data $40,000,000 20,000,000 20,000,000 8,000,000 12,000,000 800,000 11,200,000 4,480,000 $6,720,000 Next Year's Projected Data $43,200,000 21,600,000 21,600,000 8,000,000 13,600,000 800,000 12,800,000 5,120,000 7,680,000 $2.56 Earnings per share (EPS) $2.24 Given this information, complete the following table and then answer the questions that follow. When performing your computations, round your EPS value and the percentage change values to two decimal places. Campbell Construction Data DOL (Sales - $40,000,000) DFL (EBIT - $12,000,000) DTL (Sales - $40,000,000) Everything else remaining constant, assume Campbell Construction decides to convert its labor intensive manufacturing facility into a capital-intensive facility by laying off over 75% of its labor force and replacing the workers with robotic and technologically advanced manufacturing equipment Assume that, over the next five years, the wages saved as a result of the layoffs will pay for the changes made to Campbell's plant and equipment channes would this albaceable