Calculate the degree of financial

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Suppose a company has debt of $240,000 and the cost of debt is 15%, the common stock outstanding is 2,000 shares, and a tax rate of 40%. Currently, the EBIT is $80,000.

Calculate the EPS of the company.

Calculate the degree of financial (DFL).

Do you expect the value DFL to increase, decrease or remain the same if the debt is reduced? Why?

Reference no: EM131188224

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