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Pinches Salt Company has the following income statement for 2010:
Sales
$5,000,000
Variable operating costs
1,000,000
Fixed operating costs
2,000,000
EBIT
$2,000,000
Interest
500,000
EBT
$1,500,000
Tax (at 40%)
600,000
EAT
$900,000
Preferred dividends
100,000
Earnings available to common stockholders
$800,000
Shares outstanding
400,000
a. Compute Pinches's DOL, DFL, and DCL.
b. If sales increase to $5,500,000, what is your forecast of EPS?
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