44) Vapor Lock Motors’ EBIT is $7,000,000, the company’s interest expense is $2,000,000, and its tax rate is 40 percent. Vapor Lock’s beta is 1.5 a. What is Vapor Lock’s DFL? b. If Vapor Lock were able to grow its EBIT by 50%, what would be the percentage increase in net income? c. If Vapor Lock were able to grow its EBIT by 50%, what would be the resulting net income?

44) Vapor Lock Motors’ EBIT is $7,000,000, the company’s interest expense is $2,000,000, and its tax rate is 40 percent. Vapor Lock’s beta is 1.5 a. What is Vapor Lock’s DFL? b. If Vapor Lock were able to grow its EBIT by 50%, what would be the percentage increase in net income? c. If Vapor Lock were able to grow its EBIT by 50%, what would be the resulting net income?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 7P

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