question 10

Neptune Corporation has an existing capital structure that is all equity. The firm has calculated the EBIT-EPS indifference point for 2 different capital structures to finance a new project. Plan A is all debt financing and Plan B is all equity financing. Which of the following statements is correct? At the EBIT-EPS indifference point Neptune will prefer Plan B At the EBIT-EPS indifference point, Neptune will prefer Plan A Plan A and Plan B result in the same EPS at the EBIT-EPS indifferent point O Both Plan A and Plan B increase the firm's leverage Both Plan A and Plan B decrease the firm's leverage