You Are Writing a Comparison of an All-Equity Structure to a Levered

question 31

Multiple Choice

You are writing a comparison of an all-equity structure to a levered capital structure for a firm.It is accurate to state in this comparison that

• A)earnings per share will always be higher in the all-equity structure.
• B)firms will only select the levered structure when individual rates on borrowed funds are lower than corporate rates.
• C)leverage lowers shareholders' returns in bad financial times.
• D)the all-equity firm has a greater advantage the higher the firm's earnings before interest.
• E)leverage improves shareholders' returns regardless of the firm's level of earnings.

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Definitions:

Melancholic

Pertaining to a mood characterized by deep sadness or gloominess, often associated with a type of depression.

Anorexia

An eating disorder characterized by an obsessive fear of gaining weight, leading to severely restricted food intake and often significant weight loss.

Pleasurable Activities

Activities that result in enjoyment or satisfaction, typically used as therapeutic interventions to improve mood and reduce depression.

Dysthymia

A persistent depressive disorder involving a chronic form of depression more mild than major depressive disorder but lasting for a longer period.