Fanny Brice, owner of Funny Girl Comics, has sales revenue of $200,000, earnings before interest and taxes

Fantastic news! We've Found the answer you've been seeking!

Question:

Fanny Brice, owner of Funny Girl Comics, has sales revenue of $200,000, earnings before interest and taxes of $95,000, and net income of $30,000 this year. She is expecting sales to increase to $225,000 next year. The degree of operating leverage is 1.35 and the degree of financial leverage is relatively low at 1.09.

a Calculate the percentage change in EBIT Ms. Brice can expect between this year and next year.

b. How much will EBIT be next year in dollars?

c. Calculate the percentage change in net income Ms. Brice can expect between this year and next year.

d. How much net income should Ms. Brice expect next year?

e. Calculate this year’s degree of combined leverage (DCL).

f. Ms. Brice is considering a price increase. This would mean the percentage change in sales revenue between this year and next year would be 20 percent. If this is true, what net income (in dollars) can she expect for next year?