Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the production of brick for the homebuilding industry. Their financial information is as follows:

a. If you combine Sinclair€™s capital structure with Boswell€™s operating plan, what is the degree of combined leverage? (Round to two places to the right of the decimal point.)
b. If you combine Boswell€™s capital structure with Sinclair€™s operating plan, what is the degree of combined leverage?
c. Explain why you got the results you did in part b.
d. In part b, if sales double, by what percentage will EPSincrease?

Transcribed Image Text:

Capital Structure Sinclair Boswell S 900,000 Debt @ 11% Common stock, $10 per share...600,000 1.5000.000 1,500,000 1,500,000 Tot Common shares. Operating Plan Sales (55,000 units at $20 each) 60,000 150,000 $1,100,000 1,100,000 Less: Variable cost 880,000 550,000 ($16 per nit) (S10 per unit) Fixed costs Earnings before interest and taxes (EBIT). 305,000 S 220,000 245,000