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.
Correct Answer:
Verified
Correct Answer:
Verified
Q115: Thompson Feed has a cost of equity
Q116: When EBIT is positive, increasing financial leverage
Q117: Of the following, all are conclusions that
Q118: The optimal capital structure is the mixture
Q119: The cost of bankruptcy:<br>A) Includes only the
Q123: A firm has a tax rate of
Q124: M&M Proposition II with no tax states
Q125: A Mississauga firm has debt of $18,000,
Q204: The concept of homemade leverage is most
Q206: China Importers has $267,000 of debt outstanding