Assume that a firm has a degree of financial leverage (DFL) of 1.25. If sales increase by 20 percent, the firm will experience a 60 percent increase in earnings per share (EPS) and it will have an earnings before interest and taxes (EBIT) of $100,000. What will be the EBIT for the firm if sales do not increase??
A. ?$67,568
B. ?$100,000
C. ?$113,412
D. ?$84,375
E. ?$42,115
Answer: A
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