Assume that Herron, Inc. has a degree of financial leverage of 1.50. If EBIT increases from $150,000 this year to $165,000 next year, how much will earnings per share (EPS) increase, assuming no change in capital structure?

A) 6.7%
B) 10.0%
C) 15.0%
D) 22.5%
E) Cannot be determined from the information given.

Financial Leverage

The use of borrowed funds to increase the potential return of an investment, amplifying both gains and losses.

Earnings Per Share (EPS)

A financial ratio that measures the portion of a company's profit allocated to each outstanding share of common stock.

EBIT

EBIT stands for earnings before interest and taxes, and it's a measure of a firm's profit that includes all expenses except interest and income tax expenses.