The Basic Shortcoming of the EBIT-EPS Approach to Capital Structure

Multiple Choice

The basic shortcoming of the EBIT-EPS approach to capital structure is ________.

A) that the optimal capital structure is difficult to compute
B) its disregard for the presence of preferred stock in the capital structure
C) its disregard for the firm's dividend policy
D) that it concentrates on the maximization of EPS rather than the maximization of owner's wealth