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The Harding Company manufactures skates. The companys income statement for 20XX is as follows

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c-2. Using your answers to a. and b. calculate the percentage increase in EBIT and EBT from a 30 percent increase in sales volume. (Round the final answer to the nearest whole number.)

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e. Break-even point considering the interest expense as a fixed cost.

Problem 5-10 The Harding Company manufactures skates. The company's income statement for 20XX is as follows: HARDING COMPANY Income Statement Year ended December 31, 20XX Sales (10,000 skates at $50) Less: Variable costs (10,000 skates at $20) $ 500,000 200,000 Book Contribution margin Less: Fixed costs 300,000 150,000 Print Operating profit or (EBIT) Interest expense 150,000 60,000 erences Earnings before taxes (EBT) Income tax expense (40%) 90,000 36,000 Earnings after taxes (EAT) $ 54,000 Given this income statement, compute the following: a. Degree of operating leverage. (Round the final answer to 2 decimal places.) DOL 2 x b. Degree of financial leverage. (Round the final answer to 4 decimal places.) DFL 1.6667 X Problem 5-20 15 points The Norman Automatic Mailer Machine Company is planning to expand production. The expansion will cost $2,000,000, which can either be financed by bonds at an interest rate of 12 percent or by selling 40,000 shares of common stock at $50 per share. The current income statement before expansion is as follows: eBook NORMAN AUTOMATIC MAILER Income Statement Year Ended Dec. 31, 20XX Sales $3,000,000 Variable costs (40%) 1,200,000 Print Contribution margin Fixed costs 1,800,000 800,000 EBIT Interest expense 1,000,000 400,000 References Earnings before taxes Taxes @ 34% 600,000 204,000 Earnings after taxes $ 396,000 Shares EPS 100,000 $3.96 After the expansion, sales are expected to increase by $1,500,000. Variable costs will remain at 40 percent of sales, and fixed costs will increase by $550,000. The tax rate is 34 percent. a. Calculate the following before expansion. (Do not round the intermediate calculations. Round the final answers to 2 decimal places.) DOL DFL DCL Before Expansion 1.80 x 1.671 x 3,01 x b. Construct the income statement for the two financial plans. (Input all answer as positive values. Round EPS answers to 2 decimal places.) Debt Equity

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