When Comparing Levered Vs

question 84

Multiple Choice

When comparing levered vs. unlevered capital structures,leverage works to increase EPS for high levels of EBIT because:

• A) interest payments on the debt vary with EBIT levels.
• B) interest payments on the debt stay fixed, leaving less income to be distributed over less shares.
• C) interest payments on the debt stay fixed, leaving more income to be distributed over less shares.
• D) interest payments on the debt stay fixed, leaving less income to be distributed over more shares.
• E) interest payments on the debt stay fixed, leaving more income to be distributed over more shares.

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Definitions:

Stakeholder Group

A collection of individuals or organizations that have an interest in or are affected by the outcomes of a project or company’s operations.

Primary

Referring to something that is of first importance or serves as the original source.

Strategic

Pertaining to the identification of long-term or overall aims and interests and the means of achieving them.

Primary Stakeholder

An individual or group that has a direct investment, interest, or involvement in the outcomes of an organization.