The Increase in Risk to Equityholders When Financial Leverage Is

question 16

Multiple Choice

The increase in risk to equityholders when financial leverage is introduced is evidenced by:

• A) higher EPS as EBIT increases.
• B) a higher variability of EPS with debt than all equity.
• C) increased use of homemade leverage.
• D) equivalence value between levered and unlevered firms in the presence of taxes.
• E) None of these.

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