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

$$290,000$ of $16\%($annual interest$)$ debt and $4,000$ shares of common stock. The firm pays taxes at the rate of $21\%.$

a$.$ Using EBIT values of $$76,000$ and $$115,000,$ 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 $$99,000$ of $16\%($annual interest$)$ debt and $5,000$ shares of

common stock.

a$.$ Calculate the EPS for EBIT value of $$76,000$ 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 $(21\%)$

Net profit after taxes

EPS $(4,000$ shares$)$