5. Financial breakeven point The following table contains a list of selected information from the financial statements of Liverpool Inc. 8% Select Financial Data Long-term debt Borrowing rate Interest expense Tax rate Preferred stock dividends Earnings per share $375.0 million 8% $30 million 35% $8 million $0 Based on the preceding information, what is the EBIT that Liverpool Inc. must achieve in order to hit its financial breakeven point? O 40.19 0 421.15 42.31 O 387.31 O 46.54 After further analysis, Liverpool Inc. has determined that it will not be issuing preferred dividends as it had previously planned. What sort of additional decision-making flexibility will this offer the managers of Liverpool Inc., while still allowing the company to meet its financial breakeven point? O Liverpool Inc. could pay off 75% of its long-term debt. Liverpool Inc. could borrow an additional $154 million at its current borrowing rate to finance expansion O Liverpool Inc. could borrow an additional $169.4 million at its current borrowing rate to finance expansion Liverpool Inc. could repurchase 20% of its outstanding common stock. Activate Grad Now Save & Continue 4. Financial leverage The following is a list of selected information for Arsenal Co. for the fiscal year Unit Change 60 Sales in units (millions) Earnings before interest and taxes (EBIT) Less: Interest Forecasted Operations 150 2,625.00 (175.00) Sales with 40.00% Increase 210 4,042.50 (175.00) 1,417.50 (0.00) Earnings before taxes Less: Taxes (40%) Net income $2,450.00 980.00 1,470.00 $3,867.50 1,547.00 $1,417.50 (0.00) 2,320.50 850.50 Earnings per share (30 million shares) $49.00 $77.35 $28.35 You are an employee for Arsenal Co., and your boss needs help assessing the level of risk associated with the firm's current financial position. Begin by calculating the degree of financial leverage for the change between forecasted operations and the operational increase of 40.00% O 0.38 O 0.60 01.07% O 1.05X Your boss says, "Looking good so far. However, I would like to know how we stack up against our strongest competitor, Hotspurs Co." Compare the degree of operating leverage of Hotspurs Co. with that of Arsenal Co. and then answer the following question All else being equal, is Arsenal Co. more risky than, less risky than, or as equally risky as Hotspurs Co., considering that the degree of financial leverage for Hotspurs Co. is 1.07? O Less risky Not enough information given O More risky O Equally risky o Bte am