Assume You Are Comparing Two Firms That Are Identical in Every

question 47

Multiple Choice

Assume you are comparing two firms that are identical in every aspect, except one is levered and one is unlevered. Which one of the following statements is correct regarding these two firms?

• A) The levered firm has higher EPS than the unlevered firm at the break-even point.
• B) The levered firm will have higher EPS than the unlevered firm at all levels of EBIT.
• C) The unlevered firm will have higher EPS than the levered firm at relatively high levels of EBIT.
• D) The EPS for the unlevered firm will always exceed those of the levered firm.
• E) The unlevered firm will have higher EPS at relatively low levels of EBIT.

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Definitions:

Mental Speed Tasks

Cognitive exercises or tests designed to measure the quickness of an individual's thought processes, decision-making, and reaction times.

Simple Reaction Time

The time taken for an individual to respond to a single stimulus, such as light or sound, with a predetermined response.

Choice Reaction Time

The measurement of time elapsed between the presentation of a stimulus and the initiation of a response, where multiple stimuli and possible responses exist.

Inspection Time

The minimal amount of time an individual requires to discriminate between two stimuli, often used as a measure of processing speed or cognitive efficiency.