Illinois Tool Company's (ITC)degree of Total Leverage (DTL)is 3

question 13

Multiple Choice

Illinois Tool Company's (ITC) degree of total leverage (DTL) is 3.00 at a sales volume of $9 million. Determine ITC's percentage change in earnings per share (EPS) if forecasted sales increase by 20 percent to $10,800,000.

• A)60%
• B)50%
• C)32%
• D)None of the above

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Definitions:

Interest Rates

The cost of borrowing money, typically expressed as a percentage of the amount loaned, paid to the lender at regular intervals for the use of their money.

Bond Prices

The market value of a bond, which can fluctuate based on interest rates, the bond’s credit quality, and other factors.

Opportunity Cost

Cost associated with opportunities forgone when a firm’s resources are not put to their best alternative use.

Projected Net Present Value

An estimation of the present value of an investment's future net cash flows minus the initial investment cost.