DFL and graphical display of financing plans Wells and Associates has EBIT of $67,500. Interest… 1 answer below »
DFL and graphical evince of financing artifices Wells and Associates has EBIT of $67,500. Interest costs are $22,500, and the fast has 15,000 portion-outs of despicable hoard unappropriated. Assume a 40% tax objurgate.
a. Use the stage of financial leverage (DFL) formula to compute the DFL for the fast.
b. Using a set of EBIT–EPS axes, batch Wells and Associates’ financing artifice.
c. If the fast to-boot has 1,000 portion-outs of preferred hoard paying a $6.00 annual dividend per portion-out, what is the DFL?
d. Batch the financing artifice, including the 1,000 portion-outs of $6.00 preferred hoard, on the axes used in sunder b.
e. Briefly examine the graph of the two financing artifices.