Multiple Choice
Assume you are reviewing a graph depicting earnings per share (EPS) on the vertical axis and earnings before interest (EBI) on the horizontal axis.Data points for both a levered and an unlevered firm are displayed.Given this,which statement accurately describes this graph?
A) The unlevered firm has a greater reaction to a change in EBI than does the levered firm.
B) The levered firm consistently has higher EPS than the unlevered firm.
C) Both the levered and unlevered firms have zero EPS when EBI is zero.
D) Debt becomes a greater disadvantage to a firm as EBI increases.
E) When earnings exceed the breakeven point,the levered firm has the higher EPS.
Correct Answer:
Verified
Correct Answer:
Verified
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