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Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $230,000 of 17% (annual interest) debt and 3,000 shares
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $230,000 of 17% (annual interest) debt and 3,000 shares of common stock. The firm pays taxes at the rate of 27%. a. Using EBIT values of $82,000 and $117,000, determine the associated earnings per share (EPS). b. Using $82,000 of EBIT as a base, calculate the degree of financial leverage (DFL). c. Rework parts a and b assuming that the firm has $109,000 of 17% (annual interest) debt and 4,000 shares of common stock. a. Calculate the EPS for EBIT value of $82,000 below: (Round to the nearest dollar except for the EPS which should be rounded to the nearest cent.) EBIT Less: Interest Net profits before taxes Less: Taxes (27%) Net profit after taxes EPS (3,000 shares) $ $
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