Homework Answers
Current Operating Profit = $4,441,092.
Interest expenses = $2081,497
Eearning Before Tax(EBT) = $4,441,092 - $2081,497
= $2359,595
Degree of Financial Leverage(DFL)= Operating Profit/EBT
= $4,441,092/$2359,595
= 1.8821 times
As, now Change in Operating Profit = 9.1%
As DFL will remain same, calculating Change in EPS:-
DFL = Change in EPS/Change in Opearting Profit
1.8821 = Change in EPS/9.1%
Change in EPS = 17.13%
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