Question

A firm with a DFL of 2.1 expects EBIT to increase by 5.78%. If our last...

A firm with a DFL of 2.1 expects EBIT to increase by 5.78%. If our last EPS was $2.32, what will our new EPS be?

If a firm has a DCL of 2.41 and expects sales to increase by 4%, how much will EPS increase by?

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Answer #1

Ques-1) DFL = 2.1 times

DFL = % change in EPS/% Change in EBIT

2.1 = % change in EPS/5.78%

% change in EPS = 12.138%

EPS last year = 2.32

New EPS = EPS last year(1+% change in EPS)

=$2.32( 1 + 0.12138)

= $2.60

Ques-2)

DCL = 2.41

DCL = % change in EPS/% Change in Sales

2.41 = % change in EPS/4%

% change in EPS = 9.64%

So, EPS will increase by 9.64%

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