Kermit's Hardware's $($KH$)$ fixed operating costs are $$20\mathrm{.}8$ million, and its variable cost ratio is $0\mathrm{.}30.$ The firm has $$10$ million in bonds outstanding with a coupon interest rate of $9\%.$ KH has $200,000$ shares of common stock outstanding. The firm has revenues of $$32\mathrm{.}2$ million, and its marginal tax rate is $40\%.$ Compute KH$\text{'}$s degree of financial leverage.

Question $7$Answer

a$.$

$1\mathrm{.}22$

b$.$

$1\mathrm{.}09$

c$.$

$1\mathrm{.}04$

d$.$

$2\mathrm{.}07$