You Have Computed the Break-Even Point Between a Levered and an Unlevered

Multiple Choice

You have computed the break-even point between a levered and an unlevered capital structure. Ignore taxes. At the break-even level, the:

A) company is earning just enough to pay for the cost of the debt.
B) company's earnings before interest and taxes are equal to zero.
C) earnings per share for the levered option are exactly double those of the unlevered option.
D) advantages of leverage exceed the disadvantages of leverage.
E) company has a debt-equity ratio of .50.