6. The computation and interpretation of the degree of financial leverage (DFL) It is December 31, Last year, water and Power Company (W&P) had sales of $80,000,000, and it forecasts that next year's sales will be86,400,C its fixed costs have been-and are expected to continue to be-$44,000,000, and its variable cost ratio i 10.00%. W&P's capital structure consist a $15 million bank loan, on which it pays an interest rate of 12%, and 5,000,000 shares of outstanding common equity. The company's profits are taxed at a marginal rate of 35%. Given this data, compute the following: Note: For these computations, round each EPS to two decimal places. The company's percentage change in EBIT is The percentage change in W&P's earnings per share (EPS) is The degree of financial leverage (DFL) at $86,400,000 is_ The following are the two principal equations that can be used to calculate a firm's DFL value: Percentage Change in EPS Percentage Change in EBIT EBIT DFL (at EBIT=SX)= DFL (at EBIT = $X) = EBIT-Interestividernds I- Tax Rate) Consider the following statement about DFL, and indicate whether or not it is correct. Assume that at a given level of sales, the firm's DFL is 4.50. This means that a 1% decrease in the firm's EBIT will result in a corresponding 4.5% increase in the firm's EBIT False Screenshot True