What is the firms degree of financial leverage, Finance Basics

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What is the firms degree of financial leverage

Problem

Chamin, Inc. has earnings before interest and taxes (EBIT) of $375,000. Chamin has interest expense of $75,000; it must pay preferred dividends of $6,000 and it has a tax rate of 40 percent. Given a base EBIT level of $375,000, what is the firm's degree of financial leverage?

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Finance Basics: What is the firms degree of financial leverage

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