Suppose You Work for the CFO of Danforth, Inc

Multiple Choice

Suppose you work for the CFO of Danforth, Inc. He believes sales and operating income will be sharply higher each year for the foreseeable future. If he seeks to maximize earnings per share, he should _____________. (Assume there are no taxes.)

A) Increase the firm's debt to equity ratio.
B) Increase the firm's debt to equity ratio if the firm's EBIT will remain below the break-even (comparing levered to unlevered) level of EBIT.
C) Decrease the firm's debt to equity ratio.
D) Not change the firm's debt to equity ratio.
E) Decrease the firm's debt to equity ratio if the firm's EBIT will remain below the break-even (comparing levered to unlevered) level of EBIT.