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Explain how financial leverage can be used to the advantage

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In 2010 The Easy Problem Company had net income of $450,000 income tax of $80,000 and interest expense of $50,000.

a. Explain how Financial Leverage can be used to the advantage of a business, but also how it can work to it's disadvantage. IE what are the circumstances for each scenario

b. Compute the degree of Financial Leverage if

a. Net income before interest and taxes increases by 10%

b. Net income before interest and taxes declines by 50%

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This assignment is related to Leverage chapter. The solution is done in MS Excel document. All the questions have been appropriately answered along with necessary calculations wherever required.

Reference no: EM13574178

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