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Explain what this statement means: One part of leverage affects both EBIT and EPS. The other type affects only EPS. Explain why the following statement
- Explain what this statement means: "One part of leverage affects both EBIT and EPS. The other type affects only EPS."
- Explain why the following statement is true: "All else the same, firms with relatively stable sales are able to carry relatively high debt/assets ratios."
- If a firm went from zero debt to successively higher levels of debt, why would you expect its stock price to first rise, then hit a peak, and then begin to decline?
- Is the debt level that maximizes a firm's expected EPS the same as the one that maximizes its stock price? Explain.
- Explain how a firm might shift its capital structure so as to change its weighted average cost of capital (WACC). What would be the impact on the value of the firm?
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1 One part of leverage affects both EBIT and EPS The other type affects only EPS This statement refers to the two types of leverage operating leverage ...
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Intermediate Financial Management
Authors: Brigham, Daves
10th Edition
978-1439051764, 1111783659, 9780324594690, 1439051763, 9781111783655, 324594690, 978-1111021573
