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?