10) For a levered firm, A) as earnings before interest and taxes (EBIT) increases, earnings per share (EPS) increases by the same percentage. B) as EBIT increases, EPS increases by a larger percentage. C) as EBIT increases, EPS decreases by the same percentage. D) as EBIT increases, EPS decreases by a larger percentage.
10) For a levered firm, A) as earnings before interest and taxes (EBIT) increases, earnings per share (EPS) increases by the same percentage. B) as EBIT increases, EPS increases by a larger percentage. C) as EBIT increases, EPS decreases by the same percentage. D) as EBIT increases, EPS decreases by a larger percentage.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:10) For a levered firm,
A) as earnings before interest and taxes (EBIT) increases, earnings per share (EPS) increases
by the same percentage.
B) as EBIT increases, EPS increases by a larger percentage.
C) as EBIT increases, EPS decreases by the same percentage.
D) as EBIT increases, EPS decreases by a larger percentage.
11) The indirect costs of bankruptey are borne principally by
A) bondholders.
B) stockholders.
C) managers.
D) the federal government.
12) To calculate the total value of the firm (V), one should rely on the
A) market values of debt and equity.
B) market value of debt and the book value of equity.
C) book values of debt and the market value of equity.
D) book values of debt and equity.
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