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A firm has a degree of financial leverage of 1.20. If earnings before interest and tax (EBIT) increase by 20%, then net income: a. will

A firm has a degree of financial leverage of 1.20. If earnings before interest and tax (EBIT) increase by 20%, then net income:

a. will remain the same, as there is no relationship between net income and EBIT.

b. will increase by 20%.

c. will decrease by 24%.

d. will increase by 24%.

e. None of the answers is correct.

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