Assume That a Firm Has a DFL of 1

question 83

Multiple Choice

Assume that a firm has a DFL of 1.25.If sales increase by 20 percent, the firm will experience a 60 percent increase in EPS, and it will have an EBIT of $100,000.What will be the EBIT for this firm if sales do not increase?

• A)$113,412
• B)$100,000
• C)$84,375
• D)$67,568
• E)$42,115

Comprehend the concept of beta as a measure of systematic risk and its impact on expected returns.

Grasp the significance of diversification in reducing portfolio risk and understand the distinction between diversifiable and non-diversifiable risks.

Know how the security market line represents the relationship between risk (beta) and expected return and how it aids in determining if an investment is correctly priced.

Understand how to compute the expected return on a portfolio and the role of portfolio weights.

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Definitions:

Physical Changes

Alterations in the form, appearance, or structure of a substance without changing its chemical composition.

Cognitive Changes

Modifications in thought processes, including memory, problem-solving, and decision-making.

Aging

The process of becoming older, a biological progression that involves changes in physical appearance, bodily functions, and susceptibility to diseases.

Alzheimer's Disease

A progressive neurodegenerative disease that affects memory, thinking, and behavior, leading to dementia.