Corporate Finance Q123

0. Which of the following is most likely to happen to the degree of total leverage (DTL) if a company decides to switch to accelerated depreciation from straight line depreciation, holding all other factors constant?

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Option : A
Explanation : Bases of the following equation: DTL = [Q (P - V)] / [Q (P - V) - F - C] By switching to accelerated depreciation method, the fixed cost increases. Therefore, the DTL increases (i.e. the numerator does not change and denominator decreases).

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