3. The computation and interpretation of the degree of financial leverage (DFL) It is December 31. Last year, Torres Industries had sales of $80,000,000, and it forecasts that next year's sales will be $76,000,000. Its fixed costs have been-arid are expected to continue to be-$32,000,000, and its variable cost ratio is 11.00%. Torres's capital structure consists of a $15 million bank loan, on which it pays an interest rate of 8%, and 750,000 shares of common equity. The company's profits are taxed at a marginal rate of 40% Given this data, complete the following sentences: Note: Round Intermediate calculations to two decimal places. The company's percentage change in EBIT is The percentage change in Torres's earnings per share (EPS) is The degree of financial leverage (DFL) of $76,000,000 is The following are the two principal equations that can be used to calculate a firm's DFL value: DFL (at EBIT = SX) Percentage Change in EPS Percentage Change in ERIT DFL (at EBIT = $x) Percentage Change in EPS Percentage Change in EBIT DFL (at EBIT = $X) EBET (EBIT Interest - (Preferred Dividends/(1- Tu Ratel) Consider the following statement about DFL, and indicate whether or not it is correct. The reason that the firm's preferred dividends are divided by (1 - Tax Rate) in the second equation is to adjust for the tax deductibility of the dividends. This adjustment converts them from a pretax basis to an after-tax basis. False True