A firm has sales of $5,000,000 of which 65% are variable costs

Finance Aug 04, 2020

A firm has sales of $5,000,000 of which 65% are variable costs. There

are no fixed operating costs, but interest expense totals $750,000. The company is in the 35% tax bracket and has 1,000,000 shares outstanding.
a. Calculate the company's EBIT and EPS.
b. Calculate EBIT and EPS if sales goes up by 5% and if sales goes down by 5%.
c. For each case of part b, by what percent did EBIT and EPS change?
d. Compare the results of part c for EBIT and EPS.