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Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $220,000 of 18% (annual interest) debt and 1,000 shares of
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $220,000 of 18% (annual interest) debt and 1,000 shares of common stock. The firm pays taxes at the rate of 30%. a. Using EBIT values of $76,000 and $124,000, determine the associated earnings per share (EPS). b. Using $76,000 of EBIT as a base, calculate the degree of financial leverage (DFL). c. Rework parts a and b assuming that the firm has $103,000 of 18% (annual interest) debt and 2,000 shares of common stock
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