Explain the degree of combined leverage

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Given the following information for Computech, compute the firm's degree of combined leverage (dollars are in thousands except EPS). Round your answer to one decimal place.

 

 

Year 1

 

Year 2

Sales

 

$550,000

 

$621,500

Fixed costs

 

110,000

 

110,000

Variable costs

 

200,000

 

226,000

Earnings before interest and taxes

 

$240,000

 

$285,500

Interest

 

25,000

 

25,000

Earnings per share (EPS)

 

$4.30

 

$5.21

Degree of combined leverage: 

Reference no: EM133205094

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