When Comparing Levered Vs

question 49

Multiple Choice

When comparing levered vs.unlevered capital structures, leverage works to increase EPS for high levels of EBIT 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 less shares.
• C)interest payments on the debt stay fixed, leaving more income to be distributed over less shares.
• D)interest payments on the debt stay fixed, leaving less income to be distributed over more shares.
• E)interest payments on the debt stay fixed, leaving more income to be distributed over more shares.

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Definitions:

Persistent Unemployment

A situation where unemployment remains high or continues over a long period, often due to structural factors in the economy.

Wage Discrimination

The practice of paying different wages to employees who perform similar jobs, based on non-job-related factors like gender, race, or age.

Efficiency Wage

A wage set above the market equilibrium to increase productivity by encouraging higher effort or reducing turnover among employees.

Positive Amount of Unemployment

A situation where there is a nonzero level of unemployment in the economy, often considered normal due to frictions and transitions in the job market.