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What is the degree of financial leverage

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Question - Winterburn Corporation is considering two financing alternatives. Under the first alternative, interest expense would be $60,000 and there would be 20,000 common shares outstanding. Under the second alternative, interest costs would be $85,000 and there would be 15,000 common shares outstanding. Winterburn has EBIT of $250,000 and is in the 40% tax bracket. What is the degree of financial leverage for the first alternative?

Reference no: EM133059879

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