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Question
New World Manufacturing has determined that its degree of financial leverage (DFL) is 3.0 when sales equal $750,000, which happens to be its operating breakeven point (i.e., SOpBE = $750,000). At sales equal to $750,000, which of the following conditions must exist for New World Manufacturing? Assume everything else is equal.
a. Earnings per share (EPS) = 0
b. Earnings per share (EPS) > 0
c. Earnings per share (EPS) < 0
d. Earnings before interest and taxes (EBIT) > 0
e. Total operating costs = 0
Answer
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