In an EPS-EBI Graphical Relationship, the Debt Ray and Equity

question 67

Multiple Choice

In an EPS-EBI graphical relationship, the debt ray and equity ray cross.At this point the equity and debt are:

• A)equivalent with respect to EPS but above and below this point equity is always superior.
• B)at breakeven in EPS but above this point debt increases EPS via leverage and decreases EPS below this point.
• C)equal but away from breakeven equity is better as fewer shares are outstanding.
• D)at breakeven and MM Proposition II states that debt is the better choice.
• E)at breakeven and debt is the better choice below breakeven because small payments can be made.

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Definitions:

Maladaptive Behaviour

Actions or tendencies that are counterproductive to oneself or others, often hindering coping with life's challenges.

Abnormality

A deviation from the norm or average, often used in psychology to describe behavior or patterns that differ significantly from societal expectations.

Deviance

Behaviors or actions that deviate from societal norms or expectations, often leading to negative judgement.

Persistence

The quality of continuing steadfastly or firmly in some state, purpose, or course of action, despite difficulties or opposition.