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Estimate the firm degree of financial leverage

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Reference no: EM132657222

A firm currently has EBIT of $25000 interest expense of $6250 preferred dividends of $1000 and a tax rate of 40%.

Show the portion of the firm's current income statement containing EBIT to Earning available to common shareholders (EAS).

Show how the EAS changes when EBIT of the firm Increase by 10%. Estimate the firm's degree of financial leverage.

Reference no: EM132657222

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