Question

Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the production of tile for the home-building industry. Their financial information is as follows: Capital Structure Sinclair Boswell Debt @ 10% $1,020,000 0 Common stock, $10 per share 680,000 $1,700,000 $1,700,000 $1,700,000 Common shares 68,000 170,000 Operating Plan Sales (57,000 units at $15 each) $855,000 $855,000 Less: Variable costs 684,000 342,000 ($12 per unit) ($6 per unit) Fixed costs 0 307,000 Earnings before interest and taxes (EBIT) $171,000 $206,000

a. If you combine Sinclair’s capital structure with Boswell’s operating plan, what is the DCL? (Round the final answer to 2 decimal places.) DCL X

b. If you combine Boswell’s capital structure with Sinclair’s operating plan, what is the DCL? (Round the final answer to 2 decimal places.) DCL X

c. Not available in Connect.

d. In part b, if sales double, by what percentage will EPS increase? EPS will increase by %

Answer 1