A firm has a DFL of 9.5. What does this tell us about the firm ? Assume 40% tax.

CS Executive · Financial and Strategic Management · PYQS · June 2024
A firm has a DFL of 9.5. What does this tell us about the firm ? Assume 40% tax.
(A) If sales rise by 9.5%, then EBIT will rise by 1%
(B) If EBIT rises by 5.7%, then EPS will rise by 1%
(C) If EBIT rise by 1%, then EPS will rise by 9.5%
(D) If sales rise by 1%, then EBIT will rise by 5.7%

Answer & Explanation:

Correct Answer: Option (C)

Official answer key: (C).

Topics: Financial Management

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