According to MM,leverage May Increase Expected Earnings Per Share but Still

question 67

Multiple Choice

According to MM,leverage may increase expected earnings per share but still leave the share price unchanged because:

• A) the firm's operating risk decreases.
• B) the number of shares is decreased.
• C) the required return on equity increases.
• D) the firm is less risky.

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Definitions:

Command-and-control Regulation

A regulatory approach where the government sets specific limits or standards for various aspects of business operations to control or reduce negative externalities.

Opportunity Cost

The relinquishment of potential profits from various alternatives upon choosing a certain one.

Lobster Population

The lobster population refers to the number of lobsters living in a particular area or region, which can fluctuate based on factors like fishing practices, environmental conditions, and predator-prey dynamics.

Environmental Preservation

The practice of protecting the natural environment on individual, organizational, or governmental levels, aimed at keeping ecosystems intact and safeguarding biodiversity.