In an EPS-EBI Graphical Relationship,the Slope of the Debt Ray

question 49

Multiple Choice

In an EPS-EBI graphical relationship,the slope of the debt ray is steeper than the equity ray. The debt ray has a lower intercept because:

• A) more shares are outstanding for the same level of EBI.
• B) the break-even point is higher with debt.
• C) a fixed interest charge must be paid even at low earnings.
• D) the amount of interest per share has only a positive effect on the intercept.
• E) the higher the interest rate the greater the slopE.

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Definitions:

Modus Ponens

A form of logical argument that concludes a certain consequent from a single premise in the form "If P, then Q" and P, therefore Q.

Modus Tollens

A form of deductive argument in logic that, if the implication is true, then denies the consequent to conclude the denial of the antecedent.

Proposition

A declarative sentence that can be evaluated as true or false, conveying a statement or assertion.

Standard Form

In logic, the standard form refers to a way of structuring categorical propositions to clearly express their subject, predicate, and quantifier, facilitating easier analysis.