What is its degree of financial leverage

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Problem - Nuance Art has only one type of debt outstanding: a long-term bond with a face value of $300,000 and a coupon rate of interest equal to 11 percent. Nuance expects this year's EBIT to equal $99,000, and its marginal tax rate is 30 percent.

Required -

(a) If Nuance has no preferred stock, what is its degree of financial leverage (DFL)?

(b) If Nuance has preferred stock that pays an annual dividend equal to $18,480, what is its DFL?

Reference no: EM132698968

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