All Else Being Equal,if Net Income Decreases

question 29

Multiple Choice

All else being equal,if net income decreases:

• A)EPS decreases and ROE increases.
• B)EPS and ROE both decrease.
• C)EPS increases and ROE decreases.
• D)EPS and ROE both increase.

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Definitions:

Pre-Tax Cost

The expense or cost incurred by an entity before taxes have been deducted.

Unlevered Cost

The cost of an investment or project assuming no debt is used to finance the investment; reflecting its cost of capital without leverage.

Unlevered Cost

The cost of capital that a company faces before taking into account the effects of debt financing.

Pre-Tax Cost

The expense or cost that a company incurs before adjusting for taxes.