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 @ 12%		$1,320,000			0
Common stock, $10 per share		880,000			$2,200,000
		$2,200,000			$2,200,000
Common shares		88,000			220,000
Operating Plan
Sales (62,000 units at $25 each)		$1,550,000			$1,550,000
Less: Variable costs		1,116,000			744,000
		($18 per unit)			($12 per unit)
Fixed costs		0			312,000
Earnings before interest and taxes (EBIT)		$434,000			$494,000

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

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

EPS will increase by             %

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE