Finance 200

11. The Sterling Tire Company’s income statement for 2008 is as follows: Given this income statement, compute the following: STERLING TIRE COMPANY Income Statement For the Year Ended December 31, 2008 Sales (20,000 tires at $60 each) . . . . . . . . . . . . . . . . . . . . . . . . $1,200,000 Less: Variable costs (20,000 tires at $30) . . . . . . . . . . . . . . . 600,000 Fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 Earnings before interest and taxes (EBIT) . . . . . . . . . . . . . . . . 200,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 Earnings before taxes (EBT) . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 Income tax expense (30%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 Earnings after taxes (EAT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 105,000 a. Degree of operating leverage. b. Degree of financial leverage. c. Degree of combined leverage. d. Break-even point in units.