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    Leverage Ratios and EPS

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    Earnings per share (EPS) for Valcor, Inc. are $3 at a sales level of $2 Million. If Valcor's degree of operating leverage is 2.0 and its degree of combined leverage is 8.0, what will happen to EPS if operating income increases by 3 percent?

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    Degree of operating leverage=DOL=percent change in operating income/percent change in sales

    Given, DOL=2.0 and ...

    Solution Summary

    Solution discusses the impact of change in operating income on EPS in the given case.