# Level I Corporate Finance

## Marginal Cost of Capital: Break Points

Typically, the more capital a company wants to raise, the more expensive it will be for each additional increment; i.e., as its capital budget grows, its marginal cost of capital (MCC) increases.  Because a company will undertake a project only when that project’s internal rate of return (IRR) is greater than the cost of capital […]

CFA® Level I Corporate Finance Membership, CFA® Level I Membership

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## Degree of Total Leverage (DTL)

The degree of total leverage (DTL) is defined as: $DTL\ =\ \frac{\%\ change\ in\ Net\ Income}{\%\ change\ in\ Sales}\ =\ \frac{\dfrac{\Delta Net\ Income}{Net\ Income}}{\dfrac{\Delta Sales}{Sales}}$ Suppose that a company has only variable expenses – 70% of sales – and no interest expense; taxes are 40% of EBT.  If Sales are $100,000 and ΔSales is$1,000, then, […]

CFA® Level I Corporate Finance Membership, CFA® Level I Membership

This will give you access to this and all other articles at that membership level.

## Degree of Financial Leverage (DFL)

The degree of financial leverage (DFL) is defined as: $DFL\ =\ \frac{\%\ change\ in\ Net\ Income}{\%\ change\ in\ EBIT}\ =\ \frac{\dfrac{\Delta Net\ Income}{Net\ Income}}{\dfrac{\Delta EBIT}{EBIT}}$ Suppose that a company has no interest expense, and that taxes are 40% of EBIT.  If EBIT is $20,000 and ΔEBIT is$300, then, taxes will be $8,000 (=$20,000 […]

CFA® Level I Corporate Finance Membership, CFA® Level I Membership

This will give you access to this and all other articles at that membership level.

## Degree of Operating Leverage (DOL)

The degree of operating leverage (DOL) is defined as: $DOL = \frac{\%\ change\ in\ EBIT}{\%\ change\ in\ Sales}\ =\ \frac{\dfrac{\Delta EBIT}{EBIT}}{\dfrac{\Delta Sales}{Sales}}$ Suppose that a company has only variable expenses, and those are 70% of sales.  If Sales are $100,000 and ΔSales is$1,000, then, expenses will be $70,000 (=$100,000 × 70%) Δexpenses will […]