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

question 53

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:

Algorithms

are set procedures or formulas for solving a problem, typically by a computer.

Critical Periods

Limited windows of time during development when the organism is particularly susceptible to certain stimuli, which can have long-lasting effects on its abilities.

Intuition

The capacity to grasp something naturally, without relying on deliberate thought.

Undramatically

In a manner that lacks excitement, drama, or noticeable impact.