Homework answers / question archive / (Leverage and? EPS) You have developed the following pro forma income statement for your?corporation:    Sales   45,750,000   Variable costs   (22,800,000)   Revenue before fixed costs   22,950,000   Fixed costs   (9,200,000)   EBIT   13,750,000   Interest expense   (1,350,000)   Earnings before taxes   12,400,000   Taxes (50%)   (6,200,000)   Net income   6,200,000   Question C-1

(Leverage and? EPS) You have developed the following pro forma income statement for your?corporation:    Sales   45,750,000   Variable costs   (22,800,000)   Revenue before fixed costs   22,950,000   Fixed costs   (9,200,000)   EBIT   13,750,000   Interest expense   (1,350,000)   Earnings before taxes   12,400,000   Taxes (50%)   (6,200,000)   Net income   6,200,000   Question C-1

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(Leverage and? EPS) You have developed the following pro forma income statement for your?corporation: 

 

Sales

 

45,750,000

 

Variable costs

 

(22,800,000)

 

Revenue before fixed costs

 

22,950,000

 

Fixed costs

 

(9,200,000)

 

EBIT

 

13,750,000

 

Interest expense

 

(1,350,000)

 

Earnings before taxes

 

12,400,000

 

Taxes (50%)

 

(6,200,000)

 

Net income

 

6,200,000

 

Question C-1. If Sales should decrease by 25% and interest expense should decrease by 50%, the percentage change in net income % (Please round to two decimal places) *Also note if it is a positive or negative