Which One of the Following Statements Concerning fiNancial Leverage Is

question 265

Multiple Choice

Which one of the following statements concerning financial leverage is correct in a world without taxes?

• A) Leverage is beneficial only when EBIT is relatively low.
• B) EPS is decreased when leverage is used and the expected level of EBIT is achieved.
• C) Financial leverage lowers the risk level of a firm.
• D) The amount of financial leverage employed has a major effect on the value of the firm.
• E) M&M Proposition I states that financial leverage is irrelevant to the value of a firm.

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