Considering “Indifference analysis”, which indicates the level of operating income (or earnings before interest and tax, EBIT) where EPS (earnings per share) are equal whether the firm uses debt or equity, we can conclude that the following holds:

4.

Question 4

Considering “Indifference analysis”, which indicates the level of operating income (or earnings before interest and tax, EBIT) where EPS (earnings per share) are equal whether the firm uses debt or equity, we can conclude that the following holds:

1 point

Beyond the indifference point, more equity will maximize EPS