If Ubu's Pear Farm Expects EBIT to Increase 10% Next

question 81

Multiple Choice

If Ubu's Pear Farm expects EBIT to increase 10% next year after a 15% increase in sales,what is the expected percentage change in EPS if the degree of total leverage is 4?

• A) 16%
• B) 20%
• C) 45%
• D) 30%
• E) 60%

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Definitions:

Elastic Supply Curve

A concept in economics describing a supply curve where the quantity supplied changes significantly in response to a change in price.

Purely Competitive Market

An economic structure where numerous small companies, a uniform product, unimpeded access and exit, and absolute knowledge prevail.

Industry Exit

The process by which a company ceases operations in a specific industry, typically due to financial losses, market competition, or changing industry conditions.

Long Run Adjustments

Changes or adaptations made by firms in response to long-term changes in market conditions, where all inputs and production capacities can be varied.