Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of

$250,000 of 17% (annual interest) debt and 2,000 shares of common stock. The firm pays taxes at the rate of 30%.

a. Using EBIT values of $82,000 and $124,000, 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

$92,000 of 17% (annual interest) debt and 3,000 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	$	82000
Less: Interest
Net profits before taxes	$
Less: Taxes (30%)
Net profit after taxes	$
EPS (2,000 shares)	$