The Increase in Risk to Equityholders When Financial Leverage Is

Multiple Choice

The increase in risk to equityholders when financial leverage is introduced is evidenced by:

A) higher EPS as EBIT increases.
B) a higher variability of EPS with debt than all equity.
C) increased use of homemade leverage.
D) equivalence value between levered and unlevered firms in the presence of taxes.
E) None of the above.