Wells and Associates has EBIT of $ 65,700. Interest costs are $ 22,900​, and the firm has 15,200 shares of common stock outstanding. Assume a 40 % tax rate.
a. Use the degree of financial leverage ​(DFL​) formula to calculate the DFL for the firm.
b. Using a set of EBIT-EPS ​axes, plot Wells and​ Associates' financing plan.
c. If the firm also has 1,100 shares of preferred stock paying a $ 5.75 annual dividend per​ share, what is the​ DFL?
d. Plot the financing​ plan, including the 1,100 shares of $ 5.75 preferred​ stock, on the axes used in part ​(b​).
e. Briefly discuss the graph of the two financing plans.