Chamin, Inc. has earnings before interest and taxes (EBIT) of $375,000. Chamin has interest expense of $75,000; it must pay preferred dividends of $6,000 and it has a tax rate of 40 percent. Given a base EBIT level of $375,000, what is the firm's degree of financial leverage? Use the formula that includes the preferred dividends in the calculation.

Chamin, Inc. has earnings before interest and taxes (EBIT) of $375,000. Chamin has interest expense of $75,000; it must pay preferred dividends of $6,000 and it has a tax rate of 40 percent. Given a base EBIT level of $375,000, what is the firm's degree of financial leverage? Use the formula that includes the preferred dividends in the calculation.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 13P

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