A company has predicted earnings per share (EPS) of $3.74 and a degree of financial leverage of 2.4 at the predicted level of EBIT. What is the expected percentage change in EPS if EBIT turn out to be 10% lower than expected?

A company has predicted earnings per share (EPS) of $3.74 and a degree of financial leverage of 2.4 at the predicted level of EBIT. What is the expected percentage change in EPS if EBIT turn out to be 10% lower than expected?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A company has predicted earnings per share (EPS) of $3.74 and a degree of financial leverage of 2.4 at the predicted level of EBIT.

What is the expected percentage change in EPS if EBIT turn out to be 10% lower than expected?

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