Gentech, Inc A)112
B)1

Gentech, Inc. is an integrated circuit (microchip) manufacturer based out of New Jersey. Its principal products include microprocessors and motherboard chipsets. Selected financial statement values for Gentech are shown in the table, below. What is the degree of financial leverage for Gentech given the change in earnings from Year 1 to Year 2? $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Gentech Inc. } \\\text { (\$000s) }\end{array} & & \\\hline & \text { Year 1 } & \text { Year 2 } \\\hline \text { EBIT } & \$ 9,000 & \$ 9,800 \\\hline \text { Interest } & 50 & 50 \\\hline \text { Pre-Tax Income } & 8,950 & 9,750 \\\hline \text { Taxes } & 2,900 & 3,100 \\\hline \text { Net Income } & 6,050 & 6,650 \\\hline \text { Shares } & & \\\text { Outstanding } & 14,500 & 14,500 \\\hline \text { EPS } & 0.4172 & 0.4586 \\\hline\end{array}$$

A) 1.12
B) 1.01
C) 0.67
D) 3.11
E) 1.54