What is its degree of financial leverage (dfl)

Reference no: EM131401633

Nuance Art has only one type of debt outstanding: a long-term bond with a face value of $300,000 and a coupon rate of interest equal to 11 percent. Nuance expects this year's EBIT to equal $99,000, and its marginal tax rate is 30 percent.

(a) If Nuance has no preferred stock, what is its degree of financial leverage (DFL)?

(b) If Nuance has preferred stock that pays an annual dividend equal to $18,480, what is its DFL?

Reference no: EM131401633

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