1. "Flexibility" under the FRICTO approach to making capital structure decisions means:

A) The ability to raise debt or equity financing as desired.

B) The ability to shift production quickly to higher margin products.

C) The ability to adjust quickly to competition.

D) The ability to respond promptly to customer complaints.

2. At the EBIT-EPS indifference point, for both financing alternatives:

A) EBIT is less than EPS.

B) EPS is the same.

C) EBIT equals EPS.

D) The EPS of the alternative with more debt is greater than the EPS of the alternative with more equity.