Assume that you are comparing two firms which are identical, with one exception. Firm A is an all-equity firm and firm B has a debt-equity ratio of .6. All else equal, firm A will:

a. earn less than firm B when the level of earnings before interest and taxes (EBIT) is relatively high.

b. generate a higher EBIT, but lower net profit than firm B.

c. generate a lower EBIT, but higher net profit than firm B.

d. always be more profitable than firm B, since it has no interest expense.

e. earn less than firm B when the level of EBIT is relatively low.