AA Tours Is Comparing Two Capital Structures to Determine How

question 92

Multiple Choice

AA Tours is comparing two capital structures to determine how to best finance its operations.The first option consists of all equity financing.The second option is based on a debt-equity ratio of 0.45.What should AA Tours do if its expected earnings before interest and taxes (EBIT) are less than the break-even level? Assume there are no taxes.

• A)select the leverage option because the debt-equity ratio is less than 0.50
• B)select the leverage option since the expected EBIT is less than the break-even level
• C)select the unlevered option since the debt-equity ratio is less than 0.50
• D)select the unlevered option since the expected EBIT is less than the break-even level
• E)cannot be determined from the information provided

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Multinational Corporations

Large companies that operate in multiple countries, beyond their original or home base, often involved in various businesses.

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The total number of people within a country's boundaries who are available for work, including both the employed and those seeking employment.

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