When Comparing Levered Vs

question 30

Multiple Choice

When comparing levered vs. unlevered capital structures, leverage works to increase EPS
For high levels of operating income because:

• A) Interest payments on the debt vary with EBIT levels
• B) Interest payments on the debt stay fixed leaving less income to be distributed over fewer shares
• C) Interest payments on the debt stay fixed, leaving less income to be distributed over more shares
• D) Interest payments on the debt stay fixed, leaving more income to be distributed over less number of shares

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