1) A firm has the DFL of 2.15 at a given level of EBIT. If...
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1) A firm has the DFL of 2.15 at a given level of EBIT. If EBIT falls by 3.5% from the current level, what will be the change in net income, to the nearest 0.01%? Drop the % symbol, do NOT ignore the negative sign.
2) A firm's net income increased by 7.8% when its EBIT increased by 5%. What was the firm's DFL at the initial level of EBIT, to the nearest 0.01? (Hint: DFL = %NI/%EBIT
3)What is the tax shield of debt for a firm with the outstanding debt of $50 million with an interest rate of 5% if it faces the tax rate of 28%? Report your answer to the nearest dollar, drop the $ sign.
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