Multiple Choice
Illinois Tool Company's (ITC) fixed operating costs are $1,260,000 and its variable cost ratio (i.e., variable costs as a fraction of sales) is 0.70.The firm has $3,000,000 in bonds outstanding at an interest rate of 8 percent.ITC has 30,000 shares of $5 preferred stock and 150,000 shares of common stock outstanding.ITC is in the 50 percent corporate income tax bracket.Forecasted sales for next year are $9 million.What is ITC's degree of financial leverage at an EBIT level of $1,440,000?
A) 1.20
B) 3.0
C) 1.60
D) 1.875
Correct Answer:
Verified
Correct Answer:
Verified
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