Problem 5-20 Combining operating and financial leverage [LO5-5] Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the production of brick for the homebuilding industry. Their financial information is as follows:

The variable costs for Sinclair are $18 per unit compared to $12 per unit for Boswell. a. If you combine Sinclairs capital structure with Boswells operating plan, what is the degree of combined leverage? (Round your answer to 2 decimal places.) b. If you combine Boswells capital structure with Sinclairs operating plan, what is the degree of combined leverage? (Round your answer to the nearest whole number.) c. In part b, if sales double, by what percentage will earnings per share (EPS) increase? (Round your answer to the nearest whole percent.)

Sinciair Boswell Capital Structure Debt @ 12% Common stock, $10 per share Total Common shares $1,140,000 760,000 $ 1,900,000 $1,900,000 $ 1,900,000 190,000 76,000 Operating Plan: Sales (59,000 units at $25 each) Variable costs Fixed costs $1,475,000 $ 1,475,000 708,000 309,000 $ 413,000 $458,000 1,062,000 Earnings before interest and taxes (EBIT)