In an EPS-Operating Income Graphical Relationship,the Slope of the Debt

question 75

Multiple Choice

In an EPS-operating income graphical relationship,the slope of the debt line is steeper than the equity line.The debt line has a negative intercept because:

• A)the break-even point is higher with debt.
• B)a fixed interest charge must be paid even at low earnings.
• C)the amount of interest per share has only a positive effect on the intercept.
• D)the higher the interest rate,the greater the slope.

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Definitions:

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