You Are Comparing Two Financial Policies

Multiple Choice

You are comparing two financial policies.The first is all equity.The second involves the use of $2 million of debt.The break-even point between these two policies occurs when the earnings before interest and taxes (EBIT) is $450 000.Given this,it is accurate to say that leverage _____ beneficial to the firm when EBIT is $325 000 and _____ beneficial when EBIT is $625 000.

A) is not;is
B) is not;is not
C) is;is not
D) The answer cannot be determined based on the information provided.
E) is;is