Assume that a firms fixed capital costs remain constant across a range of operating profit (EBIT) values. The firms DFL will vary across the range of EBIT values.

False

True

6. The computation and interpretation of the degree of financial leverage (DFL) It is December 31. Last year, Torres Industries 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 $48,000,000, and its variable cost ratio is 21.00%. Torres'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: Note: For these computations, round each value to two decimal places. - The company's percentage change in EBIT is - The percentage change in Torres's earnings per share (EPS) is - The degree of financial leverage (DFL) at $108,000,000 is Consider the following statement about DFL, and indicate whether or not it is correct. Assume that a firm's fixed capital costs remain constant across a range of operating profit (EBIT) values. The firm's DFL will vary across the range of EBIT values