What Would Be the Degree of Financial Leverage for Foggy

question 70

Multiple Choice

What would be the degree of financial leverage for Foggy Futures Weather Forecasters if the company has earnings before interest and taxes of $750,000, has a 4.5% loan on $1,000,000, and is in the 38% tax bracket? The firm does not have any preferred stock outstanding.

• A) 1.22
• B) 1.78
• C) 1.06
• D) 0.97

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Definitions:

NaI

Sodium iodide, an ionic compound often used in organic synthesis and as a supplement.

KBr

Potassium bromide, a chemical compound consisting of potassium (K) and bromine (Br), used mainly in photography and in medication.

AgBr

Silver bromide, a chemical compound used in photographic films and papers.

Lead(II) Nitrate

A white to colorless crystalline chemical compound used in making other lead compounds and some pyrotechnics.