-Refer to Figure 5

question 68

Multiple Choice

-Refer to Figure 5.6.Which diagram shows an increase in income with both bread and soup being normal goods?

• A) A
• B) B
• C) C
• D) D

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Definitions:

Interest Tax Shield

The savings in taxes achieved by deducting interest payments on debt from taxable income.

Financial Risk

The possibility of losing money on an investment or business venture, usually due to changes in market conditions or poor financial management.

Levered Firms

Companies that use debt in addition to equity in their capital structure.

Unlevered Firms

Companies that operate without the use of borrowed money or financial leverage.