Calculate the degree of financial leverage

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Reference no: EM131124681

The Plastic Corporation has a current capital structure consisting of $150,000 of 15% debt and 3,500 shares of common stock. The tax rate is 40%

a. Determine the earnings per share (EPS) when EBIT is $75,000 and $99,500.

b. Calculate the degree of financial leverage (DFL) using EBIT of $75,000 as a base.

c. What is the meaning The Plastic Corporation’s DFL?

Reference no: EM131124681

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