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Question
The following information pertains to the Classic Burger Restaurant chain:| Sales | $600,000 |
| Variable costs | 300,000 |
| Total contribution margin | 300,000 |
| Fixed costs | 100,000 |
| EBIT | 200,000 |
| Interest expense | 50,000 |
| Earnings before taxes | 150,000 |
| Taxes (30%) | 45,000 |
| Net income | $105,000 |
a. If sales increase by 10%, what will be the new level of EPS if the firm has 100,000 shares outstanding?
b. What is the percentage increase in EPS? Explain the difference between the percentage increase in sales and the percentage increase in EPS.
Answer
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