Problem 2 - Problem #2 Ryan Alexander Sinclairs DCL DCL =...

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Problem #2 Ryan Alexander Sinclair’s DCL DCL = DOL X DFL DOL = (Sales – Variable Costs)/(Sales – Variable Costs – Fixed Costs) DOL = (1,000,000 - 800,000)/(1,000,000 - 800,000 – 0) DOL = 200,000/200,000 DOL = 1 DFL = EBIT/(EBIT – I) I = 0.12 X 600,000 = 72,000 DFL = 200,000/ (200,000 – 72,000) DFL = 200,000/128,000 DFL = 1.5625 DCL = 1 X 1.5625 = 1.5625 Boswell’s DCL DOL = (1,000,000 – 500,000)/(1,000,000 – 500,000 – 300,000) DOL = 500,000/200,000 DOL = 2.5 I = 0 DFL = 200,000/200,000 DFL = 1 DCL = 1 X 2.5 = 2.5 Sinclair’s Capital Structure with Boswell’s Operating Plan DOL = (1,000,000 – 500,000)/(1,000,000 – 500,000 – 300,000) DOL = 500,000/200,000
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DOL = 2.5 I = 0.12 X 600,000 = 72,000 DFL = 200,000/(200,000 – 72,000) DFL = 200,000/128,000 DFL = 1.5625 DCL = 1.5625 X 2.5 = 3.90625 Boswell’s Capital Structure with Sinclair’s Operating Plan DOL = (1,000,000 – 800,000)/(1,000,000 – 800,000) DOL = 1 I = 0 DFL = 200,000/200,000 DFL = 1 DCL = 1 Reasons for DCL Results
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Problem 2 - Problem #2 Ryan Alexander Sinclairs DCL DCL =...

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