The Plastic Corporation has a current capital structure consisting of $400,000 of 10% debt and 3,000 shares of common stock. The tax rate is 40%. Determine the earnings per share (EPS) when EBIT is $80,000 and $120,000. Calculate the degree of financial leverage (DFL) using EBIT of $80,000 as a base.

The Plastic Corporation has a current capital structure consisting of $400,000 of 10% debt and 3,000 shares of common stock. The tax rate is 40%. Determine the earnings per share (EPS) when EBIT is $80,000 and $120,000. Calculate the degree of financial leverage (DFL) using EBIT of $80,000 as a base.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 10P: The Moore Corporation has operating income (EBIT) of 750,000. The companys depreciation expense is...

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