When Using an EPS-EBIT Chart to Evaluate a Pure Debt

question 94

Multiple Choice

When using an EPS-EBIT chart to evaluate a pure debt financing and pure equity financing plan,

• A) the debt financing plan line will graph with a steeper slope than the equity financing plan line.
• B) the debt financing plan line will have a lower level of EBIT at EPS = 0.
• C) the line of the two financing plans will intersect on the EBIT axis.
• D) the slope of the equity financing plan line will be steeper than the debt financing plan line below the intersection of the two lines.

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