You Have Computed the Break-Even Point Between a Levered and an Unlevered

question 27

Multiple Choice

You have computed the break-even point between a levered and an unlevered capital structure.Assume there are no taxes.At the break-even level,the:

• A)firm is just earning enough to pay for the cost of the debt.
• B)firm's earnings before interest and taxes are equal to zero.
• C)earnings per share for the levered option are exactly double those of the unlevered option.
• D)advantages of leverage exceed the disadvantages of leverage.
• E)firm has a debt-equity ratio of .50.

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