The Plastic Corporation has a current capital structure consisting of $400,000 of 10% debt and 3,000 shares of common stock. The tax rate is 40%.Determine the earnings per share (EPS) when EBIT is $80,000 and $120,000.Calculate the degree of financial leverage (DFL) using EBIT of $80,000 as a base.

1. Particulars I II EBIT $80,000 $120,000 Less: Interest expenses($400,000 x 10%) 40,000…

Answered: The Plastic Corporation has a current…

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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The Plastic Corporation has a current capital structure consisting of $400,000 of 10% debt and 3,000 shares of common stock. The tax rate is 40%.
1. Determine the earnings per share (EPS) when EBIT is $80,000 and $120,000.
2. Calculate the degree of financial leverage (DFL) using EBIT of $80,000 as a base.

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