A Firm Has EBIT of $375,000, Interest Expense of $75,000

question 114

Multiple Choice

A firm has EBIT of $375,000, interest expense of $75,000, preferred dividends of $6,000 and a tax rate of 40 percent. The firm's degree of financial leverage at a base EBIT level of $375,000 is ________.

• A) 0.97
• B) 1.29
• C) 1.27
• D) 1.09

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Definitions:

McCarthy Era

A period in the early 1950s in the United States characterized by heightened fears of communist influence and widespread accusations of subversion and treason.

Individualism

A social theory favoring freedom of action for individuals over collective or state control.

CIO

An abbreviation for the Congress of Industrial Organizations, a federation of unions that organized workers in industrial unions in the United States and Canada from 1935 to 1955.

Communist Members

Individuals who are part of a political party or movement advocating for communism, a system where property is owned by the community and each person contributes and receives according to their ability and needs.