When Comparing Levered Vs

Multiple Choice

When comparing levered vs.unlevered capital structures, leverage works to increase EPS for high levels of EBIT because:

A) interest payments on the debt vary with EBIT levels.
B) interest payments on the debt stay fixed, leaving less income to be distributed over less shares.
C) interest payments on the debt stay fixed, leaving more income to be distributed over less shares.
D) interest payments on the debt stay fixed, leaving less income to be distributed over more shares.
E) interest payments on the debt stay fixed, leaving more income to be distributed over more shares.