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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