Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the production of brick for the homebuilding industry. Their financial information is as follows: Sinclair Boswell Capital Structure Debt @ 11% $ 1,440,000 0 Common stock, $10 per share 960,000 $ 2,400,000 Total $ 2,400,000 $ 2,400,000 Common shares 96,000 240,000 Operating Plan: Sales (64,000 units at $20 each) $ 1,280,000 $ 1,280,000 Variable costs 1,024,000 640,000 Fixed costs 0 314,000 Earnings before interest and taxes (EBIT) $ 256,000 $ 326,000 The variable costs for Sinclair are $16 per unit compared to $10 per unit for Boswell. a. If you combine Sinclairs capital structure with Boswells operating plan, what is the degree of combined leverage? (Round your answer to 2 decimal places.) Degree of combined leverage [removed] b. If you combine Boswells capital structure with Sinclairs operating plan, what is the degree of combined leverage? (Round your answer to the nearest whole number.) Degree of combined leverage [removed] c. In part b, if sales double, by what percentage will EPS increase? (Round your answer to the nearest whole percent.) EPS will increase by [removed] % Hints References eBook & Resources
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