Question: Here it is: DOL at base $ sales TR is TR-TVC/TR-TVC-FC 3. McMichael, Inc has expected sales of $40 million. Fixed operating cost is $5

Here it is: DOL at base $ sales TR is TR-TVC/TR-TVC-FC

3. McMichael, Inc has expected sales of $40 million. Fixed operating cost is $5 million and the variable cost ratio is 65 percent. They have outstanding debt of $10 million at an interest rate of 10 percent and $3million in a 12 percent bond. McMichael has 250,000 shares of preferred stock with a $10 dividend and 1 million shares of outstanding common stock. Their average tax rate is 35% and marginal tax rate is 40%. (15 points)

  1. What is the companys DOL at its current sales level

.

  1. What is their current DFL?

  1. Forecast McMichaels EPS if sales drop to $38 million.

**please show all work

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