(Leverage and EPS) You have developed the following pro forma income statement for your corporation: Sales $45,703,000. Variable costs (22,716,000). Revenue before fixed costs $22,987,000. Fixed costs(9,182,000). EBIT, $13,805,000. Interest expense (1,351,000). Earnings before taxes $12,454,000. Taxes (50%) (6,227,000).Net income $6,227,000.

a. If sales should increase by 30 percent, by what percent would earnings before interest and taxes and net income increase?

b. If sales should decrease by 30 percent, by what percent would earnings before interest and taxes and net income decrease?

c. If the firm were to reduce its reliance on debt financing such that interest expense were cut in half, how would this affect you answers to part a and b?