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A firm has earnings before interest and tax of $ 1,200,000 , interest of $ 400,000 , and net income of $ 400,000 in Year

A firm has earnings before interest and tax of $ 1,200,000 , interest of $ 400,000 , and net income of $ 400,000 in Year I. By what percentage the new level of earnings will increase if earnings before interest and tax increase by 20 % in Year 2 , assuming the same tax rate as in Year 1 ? a . 20 % b . 30 % c . 25 % d . 40 % e . 35 % With an explanation please.

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