Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. sinclair manufacturing and boswell brothers inc. a

Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the production of brick for...

90.2K

Verified Solution

Question

Finance

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

Sinclair Boswell
Capital Structure
Debt @ 10% $ 1,740,000 0
Common stock, $10 per share 1,160,000 $ 2,900,000
Total $ 2,900,000 $ 2,900,000
Common shares 116,000 290,000
Operating Plan:
Sales (69,000 units at $15 each) $ 1,035,000 $ 1,035,000
Variable costs 828,000 414,000
Fixed costs 0 319,000
Earnings before interest and taxes (EBIT) $ 207,000 $ 302,000

The variable costs for Sinclair are $12 per unit compared to $6 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.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students