A firm expects to have a 15 percent increase in sales over the coming year.If it has operating leverage equal to 1.25 and financial leverage equal to 3.50, then what will be the percentage change in EPS?
A)30%
B)47%
C)66%
D)15%
E)22%

Question

Quizplus · Accepted Answer

The percentage change in EPS is calculated as follows:Percentage change in EPS = (Percentage change in sales) * (Operating leverage) * (Financial leverage)= (15%) * (1.25) * (3.50)= 66%

A Firm Expects to Have a 15 Percent Increase in Sales