1. Item	Base Sales
   Sales	$500,000
   Less: Total variable costs	200,000
   Revenue before fixed costs	$300,000
   Less: Total fixed costs	180,000
   EBIT	$ 120,000
   Less: Interest expense	$50,000
   Earnings before taxes (EBT)	$70,000
   Less: Taxes at 50%	$35,000
   Net income	$35,000
   Less: Preferred dividends	0
   Earnings available to common shareholders (EAC)	$35,000
   Number of common shares	10,500
   Earnings per share (EPS)	$3.33

   Given the information above, what would be the OPERATING LEVERAGE if sales increased by a 20% ?

   		1.5
   		2.5
   		2.75
   		1.75

4.4 points

QUESTION 46

1. Item	Base Sales
   Sales	$500,000
   Less: Total variable costs	200,000
   Revenue before fixed costs	$300,000
   Less: Total fixed costs	180,000
   EBIT	$ 120,000
   Less: Interest expense	$50,000
   Earnings before taxes (EBT)	$70,000
   Less: Taxes at 50%	$35,000
   Net income	$35,000
   Less: Preferred dividends	0
   Earnings available to common shareholders (EAC)	$35,000
   Number of common shares	10,500
   Earnings per share (EPS)	$3.33

   Given the information above, what would be the FINANCIAL LEVERAGE if sales increased by a 20% ?

   		2.16
   		1.96
   		2.79
   		1.72

4.4 points

QUESTION 47

1. Item	Base Sales
   Sales	$500,000
   Less: Total variable costs	200,000
   Revenue before fixed costs	$300,000
   Less: Total fixed costs	180,000
   EBIT	$ 120,000
   Less: Interest expense	$50,000
   Earnings before taxes (EBT)	$70,000
   Less: Taxes at 50%	$35,000
   Net income	$35,000
   Less: Preferred dividends	0
   Earnings available to common shareholders (EAC)	$35,000
   Number of common shares	10,500
   Earnings per share (EPS)	$3.33

   Given the information above, what would be the COMBINED LEVERAGE if sales increased by a 20% ?

   		3.45
   		4.30
   		2.50
   		4.65