Question
P13-12 (similar to) Question Help Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $230,000 of 18% (annual interest)
| P13-12 (similar to) | Question Help
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Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $230,000 of 18% (annual interest) debt and 1,000 shares of common stock. The firm pays taxes at the rate of 22%.
a. Using EBIT values of $83,000 and $116,000, 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
$106,000 of 18% (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 (22%) |
|
|
| Net profit after taxes | $ |
|
| EPS (1,000 shares) | $ |
|
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Intermediate Accounting IFRS
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
3rd edition
978-1119372936
