Page 44 - FINAL CFA I SLIDES JUNE 2019 DAY 10
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Session Unit 11:
37. Measures of Leverage
Example 2: Beta Company financed with 50% equity and 50% debt, p.71: Continuing the previous
example, assume that Beta Company is financed with 50% equity and 50% debt. The interest rate on the
debt is 6%. Calculate Beta’s net income and return on equity if its EBIT increases or decreases by 10%.
Beta’s tax rate is 40%.
tanties
DFL = 2.11 DFL = 2.05 DFL = 2.01
LOS 37.c: Analyze the effect of financial leverage on a
company’s net income and return on equity?
