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Calculate the degree of financial leverage for a firm

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Reference no: EM132912803

Problem 1: Calculate the degree of financial leverage (DFL) for a firm when its EBIT is JD4,000,000. The firm has JD3,000,000 in debt that costs 10% annually and the firm has 15,000 shares of JD4 preferred stock outstanding. The firm pays 30% in taxes.

a. 0.80
b. 1.09
c. 4.38
d. 1.11

Reference no: EM132912803

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