Debbies Sod Farm (DSF) expects its EBIT to be $2,250 this year. DSFs marginal tax rate is

Question:

Debbie’s Sod Farm (DSF) expects its EBIT to be $2,250 this year. DSF’s marginal tax rate is 40 percent, it must pay $1,000 in interest this year, and it has 500 shares of common stock outstanding.

(a) Compute the EPS that DSF expects to generate this year.

(b) What is DSF’s degree of financial leverage (DFL)? The firm has no preferred stock.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...

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