21. The degree of operating leverage is measured by relating the percentage change in EBIT to the percentage change in sales. b. earnings per share. debt ratio. d. share price. a. C. 22. ACME has EPS of $20.00 per share. It has a retention ratio of 80% and its dividend is expected to grow at a rate of 10%. If the ACME shareholders require a return of 15%, then the stock price is closest to: a. $80.00. b. $88.00. $108.00. C. d. $110.00. 23. A firm that has a relatively large amount of fixed costs can magnify its EBIT with a relatively small increase in what? Labor costs. b. Sales revenue. c. Variable costs. d. Interest expense. a. 24. DINOMITE has a payout ratio of 33.33% and EPS of $12.00. An analysis of its financial statements shows a return on equity of 15%. The sustainable growth rate is closest to: 15%. b. 12%. a. 10%. C. d. 5%. 25. If a firm decreases its interest expense, which of the following is correct? It will increase operational leverage and decrease financial leverage. b. It will not change operational leverage and decrease financial leverage. It will increase operational leverage and decrease financial leverage. a. C. d. It will not change operational leverage and increase financial leverage. 26. Which of the following will cause free cash flow to equity to increase? The company acquires a company with cash from the balance sheet. a. b. The company calls a bond after interest rates decrease. The federal government decreases the tax rate on companies to attract more business to the US. C. d. The company's accounts receivable increase from last year