Dittmar Corp

question 124

Multiple Choice

Dittmar Corp. is considering an operational change that will increase its DOL from 2.0 to 3.0. It will be funding this change with debt so that its DFL will increase from 1.2 to 1.5. Analysts believe that the overall change could increase sales by as much as 10% if it is successful, but could decrease sales by 6% if it is not successful. What is the range of possible changes in EPS based on this information?

• A)Decrease of 18% to an increase of 30%
• B)Decrease of 9% to an increase of 15%
• C)Decrease of 6% to an increase of 10%
• D)Decrease of 27% to an increase of 45%
• E)Decrease of 24% to an increase of 40%

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Definitions:

Cash Acquisition

A purchase of one company by another using cash as the form of payment rather than shares of stock or other considerations.