BICs EBIT is this year is $80,000. They paid $20,000 in interest and $25,000 in Dividends. The
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Question:
BIC’s EBIT is this year is $80,000. They paid $20,000 in interest and $25,000 in Dividends. The tax rate is 40%.
A. What is their DFL? Note: DFL = EBIT/ (EBIT – I)
B. Verify your answer by assuming a 10% increase in EBIT
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