Homework Answers
Ans. Degree of Combined Leverage = DOL *DFL = 2.5*2 = 5
Degree of Combined Leverage = % change in EPS/ % Change in Sales
DCL = 0.35/% change in sales
5 = 0.35/ % change in sales
Therefore,
percentage change in sales = 0.35/5 = 0.07
% change in sales = 7%
Answer is b.
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