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Assume That a Firm Has a Degree of Financial Leverage

Question 21

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? Do not round intermediate calculations.


A) $64,189
B) $77,703
C) $67,568
D) $54,054
E) $68,243

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