Assume That a Firm Has a Degree of Financial Leverage

question 7

Multiple Choice

Assume that a firm has a degree of financial leverage of 1.65.If sales increase by 20%,the firm will experience a 60% increase in EPS,and it will have an EBIT of $100,000.What will be the EBIT for this firm if sales do not increase?

• A) $86,533
• B) $71,867
• C) $73,333
• D) $90,200
• E) $89,467

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Definitions:

Uterine Horn

The pointed end of the uterus where it meets the fallopian tubes in many animals, playing a key role in the reproductive system.

Urinary Bladder

A muscular sac in the pelvic cavity that stores urine before it is excreted from the body.

Major Calyx

A part of the kidney that collects urine from the minor calyces before it moves to the renal pelvis.

Ureters

Tubes that transport urine from the kidneys to the bladder.