P$1212$ Degree of financial leverage Northwestern Savings and Loan has a current capital

structure consisting of $$250,000$ of $16\%($annual interest$)$ debt and $2,000$ shares of

common stock. The firm pays taxes at the rate of $21\%.$

a$.$ Using EBIT values of $$80,000$ and $$120,000,$ determine the associated earnings

per share $($EPS$).$

b$.$ Using $$80,000$ of EBIT as a base, calculate the degree of financial leverage $($DFL$).$

c$.$ Rework parts a and b$,$ assuming that the firm has $$100,000$ of $16\%($annual

interest$)$ debt and $3,000$ shares of common stock.