Hi
EBIT = $19,400
I= $ 2,940
Preferred Dividend PD= $3,940
DFL =EBIT/(EBIT - I - PD × 1 /( 1-t) )
t= 38%
DFL= ??
DFL =19400/(19400-2940 - 3940/(1-38%))
DFL = 19400/10105.16
DFL = 1.92 times
Thanks
Question Help Parker Investments has EBIT of $19.400, interest expense of $2,940, and preferred dividends of...
DFL and graphical display of financing plans Walls and Associates has EBIT of $54,000. Interest costs are $16,600, and the firm has 15,300 shares of common stock outstanding Assume a 40% tax rate a. Use the degree of financial leverage (DFL) formula to calculate the DFL for the firm. b. Using a set of EBIT-EPS axes, plot Wells and Associates' financing plan, c. If the firm also has 1,300 shares of preferred stock paying a $6.50 annual dividend per share,...
Aant Investments Inc. currently has $3.5 million in debt outstanding, bearing in interest rate of 12.3%. It wishes to finance a $5 million expansion program and is considering five alternatives. Plan Debt 0% 35% 50% Preferred Equity 0% 100% 0% 65% 0% 50% 20% 30% 20% 20% 50% 60% so The preferred stock dividend will be 12% and the price of common stock will be $18 per share. The company currently has 750,000 shares of common stock outstanding and is...
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $250,000 of 17% (annual interest) debt and 3,000 shares of common stock. The firm pays taxes at the rate of 22%. a. Using EBIT values of $80,000 and $120,000, determine the associated earnings per share (EPS) b. Using $80,000 of EBIT as a base, calculate the degree of financial leverage (DFL) c. Rework parts a and b assuming that the firm has $105,000 of 17%...
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $300,000 of 17% (annual interest) debt and 2,000 shares of common stock. The firm pays taxes at the rate of 30%. a. Using EBIT values of $84,000 and $120,000, determine the associated earnings per share (EPS). b. Using $84,000 of EBIT as a base, calculate the degree of financial leverage (DFL). c. Rework parts a and b assuming that the firm has $97,000 of 17%...
Degree of financial leverage Northwestern Savings and Loan has a current capital structure consisting of $240,000 of 15% (annual interest) debt and 2,000 shares of common stock. The firm pays taxes at the rate of 40% a. Using EBIT values of $83,000 and 5117,000. determine the associated earnings per share (EPS). b. Using 583.000 of EBIT as a base, calculate the degree of financial leverage (DFL) c. Rework parts a and bassuming that the firm has 599,000 of 15% (annual...
It is December 31. Last year, Campbell Construction had sales of $160,000,000, and it forecasts that next year's sales will be $144,000,000. Its fixed costs have been-and are expected to continue to be-$80,000,000, and its variable cost ratio is 21.00%. Campbell's capital structure consists of a $15 million bank loan, on which it pays an interest rate of 8%, and 750,000 shares of common equity. The company's profits are taxed at a marginal rate of 40%. Given this data, complete...
Interest versus dividend expense Michaels Corporation expects earnings before interest and taxes to be $48,000 for the current period. Assuming a flat ordinary tax rate of 30%, compute the firm's earnings after taxes and earnings available for common stockholders (earnings after taxes and preferred stock dividends, if any) under the following conditions: a. The firm pays $12,500 in interest. b. The firm pays $12,500 in preferred stock dividends. a. Complete the fragment of Michaels Corporation's income statement below to compute...
show all work Suppose that Encore Co. has no interest expense, and that taxes are 30% of EBIT. IEBT is $10,000 and AEBIT is $200, what is the degree of financial leverage?
Interest versus dividend expense Michaels Corporation expects earnings before interest and taxes to be $41,000 for the current period. Assuming a flat ordinary tax rate of 29%, compute the firm's earnings after taxes and earnings available for common stockholders (earnings after taxes and preferred stock dividends, if any) under the following conditions: a. The firm pays $11,800 in interest. b. The firm pays $11,800 in preferred stock dividends. a. Complete the fragment of Michaels Corporation's income statement below to compute...
The fitness studio inc 2018 income statement lists the following income and expenses: EBIT=776,000, interest expense= 150,000, and taxes=219,100. The firm has not preferred stock outstanding and 100,000 shares of common stock outstanding. Calculate the 2018 earnings per share ( Round your answer to 2 decimal places)