In an EPS-Operating Income Graph, Such as Figure 17

question 50

Multiple Choice

In an EPS-operating income graph, such as Figure 17.1, the slope of the line is steeper when the debt ratio is higher.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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