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Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $210,000 of 14% (annual interest) debt and 1,000 shares of
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $210,000 of 14% (annual interest) debt and 1,000 shares of common stock. The firm pays taxes at the rate of 30%. a. Using EBIT values of $83,000 and $123,000, determine the associated earnings per share (EPS). b. Using $83,000 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 14% (annual interest) debt and 2,000 shares of common stock. a. Calculate the EPS for EBIT value of $83,000 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 (30%) Net profit after taxes $ EPS (1,000 shares)
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