In the EBIT-EPS Approach to Capital Structure, a Constant Level

question 34

Multiple Choice

In the EBIT-EPS approach to capital structure, a constant level of EBIT is assumed

• A) to emphasize the relationship between interest expenses and taxes.
• B) to ease the calculations of owners' equity.
• C) to isolate the impact on returns of the financing costs associated with alternative capital structures.
• D) to concentrate on the effect of revenue and expense on capital structure decisions.

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