What does indifference point mean in EBIT-EPS analysis? Select one: O a. The point of indifference refers to the level of EPS at which EBIT is the same regardless of the different capital structure alternatives that the company has. O b. The point of indifference refers to the level of EBIT at which the EPS is the same regardless of the different alternatives of capital structures that the company has. It is the capital structure that maximizes the company's EPS for that period. O d. The indifference point shows the combination between the different sources of capital that maximize the value of the company measured by its EBIT.

What does indifference point mean in EBIT-EPS analysis? Select one: O a. The point of indifference refers to the level of EPS at which EBIT is the same regardless of the different capital structure alternatives that the company has. O b. The point of indifference refers to the level of EBIT at which the EPS is the same regardless of the different alternatives of capital structures that the company has. It is the capital structure that maximizes the company's EPS for that period. O d. The indifference point shows the combination between the different sources of capital that maximize the value of the company measured by its EBIT.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter11: Risk-adjusted Expected Rates Of Return And The Dividends Valuation Approach

Section: Chapter Questions

Problem 6QE

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Which of the following is most consistent with using debt to reduce agency costs or conflicts? Question 11 options: Increasing debt reduces a firm’s business risk The interest paid on debt reduces taxable income and income taxes The interest paid on debt reduces cash that management of a firm might otherwise waste or use poorly The issuance of debt helps firms increase their credit rating
Managers may sometimes be criticized for being overly conservative. If a firmdoes not borrow as much as it should, reach its optimal capital structure, andcomment on the market forces that might pressure management to use more debt.
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Which of the following is incorrect about the Pecking Order Theory? A.Firms with high ratios of fixed assets to total assets tend to have higher debt ratios.This evidence exclusively supports the pecking order theory B.When external finance is required,firms issue debt first and equity as a last resort C.Most profitable firms borrow less not because they have lower target debt ratios but beause they don't need external finance D.Firms prefer internal finance since funds can be raised without sending adverse signals
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