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Question
Bristal Boats, Inc. reports sales of $4,000,000, variable costs of $500,000, fixed operating costs of $1,250,000, and interest expense of $350,000. The corporation's EBIT is $3,250,000 and its marginal tax rate is 30%. If the corporation is able to increase its sales by 25%, thenA) its EBIT will increase by 25% and its EPS will increase by 25%.
B) its EBIT will increase by more than 25% and its EPS will increase by less than 25%.
C) its EBIT and EPS will both increase, but less than 25% due to fixed costs and taxes.
D) its EBIT will increase by more than 25% and its EPS will increase by more than the percentage increase in EBIT.
Answer
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