7. The computation and interpretation of the degree of financial leverage (DFL) Aa Aa It is December 31. Last year, Campbell Construction had sales of $120,000,000, and it forecasts that next year's sales will be 108,000,000. Its fixed costs have been-and are expected to continue to be-$60,000,000, and its variable cost ratio is 11.00%. Campbell'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 : The company's percentage change in EBIT is The percentage change in Campbell's earnings per share (EPS) is The degree of financial leverage (DFL) at $108,000,000 is The following are the two principal equations that can be used to calculate a firm's DFL value DFL (at EBIT-x)Percentage C Percentage Change in EPS Percentage Change in EBIT T EBIT EBIT Interest- [Preferred Dividends (1- Tax Rate)]) DFL (at EBIT-SX) = Consider the following statem ent 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. O True O False