Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the produc

Question

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 @ 12% Common stock, $10 per share Total Common shares $2,040,000 1,360,000 3,400,000 $3,400,000 3,400,000 340,000 Operating Plan: Sales (74,000 units at $25 each) Variable costs Fixed costs $1,850,000 $1,850,000 888,000 324,000 $ 518,000 638,000 1,332,000 Earnings before interest and taxes (EBIT) The variable costs for Sinclair are $18 per unit compared to $12 per unit for Boswell a. If you combine Sinclair's capital structure with Boswell's operating plan, what is the degree of combined leverage? (Round your answer to 2 decimal places.) Degree of combined leverage b. If you combine Boswell's capital structure with Sinclair's operating plan, what is the degree of combined leverage? (Round your answer to the nearest whole number.) Degree of combined leverage c. In part b, if sales double, by what percentage will earnings per share (EPS) increase? (Round your answer to the nearest whole percent.) EPS will increase by

Explanation / Answer

c. EPS will grow by 100%. Since no leverage, that means earnings will double at the rate of Sales.

Dear Student,

Best effort has been made to give quality and correct answer. But if you find any issues please comment your concern. I will definitely resolve your query.

Interest Expenses of Sinclair = 2040000*12% =          244,800

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---