I. II. III. 29. Which of the following statements is/are most likely true regarding corporate borrowing when EBIT is positive? Increasing financial leverage increases the sensitivity of EPS and ROE to changes in EBIT. The effect of financial leverage depends on the company's EBIT. That is, leverage is unfavourable when EBIT is relatively high, and leverage is favourable when EBIT is relatively low. High leverage decreases the returns to shareholders (as measured by ROE). A. Statement I only. B. Statement II only. C. Statement III only. D. Statements I and II only. E. All three statements are correct.

29. Which of the following statements is/are most likely true regarding corporate borrowing when EBIT is positive? Increasing financial leverage increases the sensitivity of EPS and ROE to changes in EBIT. The effect of financial leverage depends on the company's EBIT. That is, leverage is unfavourable when EBIT is relatively high, and leverage is favourable when EBIT is relatively low. High leverage decreases the returns to shareholders (as measured by ROE). A. Statement I only. B. Statement II only. C. Statement III only. D. Statements I and II only. E. All three statements are correct