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Fly by Night Aviation (FBNA)expects to have net income next year of $24 million and interest expense of $3 million.FBNA's corporate tax rate is 21%.
-IF FBNA increases leverage so that its interest expense rises by $1 million,then the amount its unlevered EBIT will change is closest to:

Question

Quizplus · Accepted Answer

The unlevered EBIT (Earnings Before Interest and Taxes) is not affected by changes in interest expense. It is calculated before interest expenses are deducted, so an increase in interest expense does not change the unlevered EBIT.

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