(similar to) Degree of financial leverage
Northwestern Savings and Loan has a current capital structure consisting of $250,000 of 18 % 18% ?(annual interest) debt and 3,000 shares of common stock. The firm pays taxes at the rate of 25%. a. Using EBIT values of $82,000 and $117,000?, determine the associated earnings per share? (EPS). b. Using $82,000 of EBIT as a? base, calculate the degree of financial leverage? (DFL). c. Rework parts a and b assuming that the firm has $105,000 of 18% ?(annual interest) debt and 4,000 shares of common stock. a. Calculate the EPS for EBIT value of $82,000 ?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 (25%) Net profit after taxes $ EPS (3,000 shares) Enter any number in the edit fields and then click Check Answer.