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Assume That a Firm Has a Degree of Financial Leverage

Question 6

Multiple Choice

Assume that a firm has a degree of financial leverage of 1.25. If sales increase by 20%, the firm will experience a 60% increase in EPS, and it will have an EBIT of $100,000. What will be the EBIT for this firm if sales do not increase?


A) $60,980
B) $70,946
C) $67,568
D) $57,931
E) $64,189

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