8. Financial leverage The following is a list of selected information for Liverpool Co. for the fiscal year. Forecasted Operations Sales with 30.00% Increase Unit Change 200 260 60 Sales in units (millions) Earnings before interest and taxes (EBIT) 3,000.00 1,260.00 4,260.00 (200.00) Less: Interest (200.00) (0.00) Earnings before taxes $2,800.00 $4,060.00 $1,260.00 Less: Taxes (40%) 1,120.00 1,624.00 (0.00) 756.00 Net income 1,680.00 2,436.00 Earnings per share (25 million shares) $67.20 $97.44 $30.24 You are an employee for Liverpool Co., and your boss needs help assessing the level of risk associated with the firm's current financial position. Begir by calculating the degree of financial leverage for the change between forecasted operations and the operational increase of 30.00%. 1.07X 1.05X O 0.60X O 0.41X Your boss says, "Looking good so far. However, I would like to know how we stack up against our strongest competitor, Everton Co." Compare the degree of operating leverage of Everton Co. with that of Liverpool Co. and then answer the following question. All else being equal, is Liverpool Co. more risky than, less risky than, or as equally risky as Everton Co., considering that the degree of financial leverage for Everton Co. is 1? O More risky Less risky O Not enough information given 8. Financial leverage The following is a list of selected information for Liverpool Co. for the fiscal year. Forecasted Operations Sales with 30.00% Increase Unit Change 200 260 60 Sales in units (millions) Earnings before interest and taxes (EBIT) 3,000.00 1,260.00 4,260.00 (200.00) Less: Interest (200.00) (0.00) Earnings before taxes $2,800.00 $4,060.00 $1,260.00 Less: Taxes (40%) 1,120.00 1,624.00 (0.00) 756.00 Net income 1,680.00 2,436.00 Earnings per share (25 million shares) $67.20 $97.44 $30.24 You are an employee for Liverpool Co., and your boss needs help assessing the level of risk associated with the firm's current financial position. Begir by calculating the degree of financial leverage for the change between forecasted operations and the operational increase of 30.00%. 1.07X 1.05X O 0.60X O 0.41X Your boss says, "Looking good so far. However, I would like to know how we stack up against our strongest competitor, Everton Co." Compare the degree of operating leverage of Everton Co. with that of Liverpool Co. and then answer the following question. All else being equal, is Liverpool Co. more risky than, less risky than, or as equally risky as Everton Co., considering that the degree of financial leverage for Everton Co. is 1? O More risky Less risky O Not enough information given