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Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of...

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Finance

Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $ 220 comma 000 of14 % (annual interest) debt and 3 comma 000 shares of common stock. The firm pays taxes at the rate of 40 %. a. Using EBIT values of $ 79 comma 000 and $ 117 comma 000, determine the associated earnings per share (EPS). b. Using $ 79 comma 000 of EBIT as a base, calculate the degree of financial leverage (DFL). c. Rework parts a and b assuming that the firm has $ 98 comma 000 of 14 % (annual interest) debt and 4 comma 000 shares of common stock.

a. Calculate the EPS for EBIT value of $ 79 comma 000 below: (Round to the nearest dollar except for the EPS which should be rounded to the nearest cent.) EBIT $ Less: Interest Net profits before taxes $ Less: Taxes (40%) Net profit after taxes $ EPS (3,000 shares) $

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