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Which statements correctly states relationship illustrated

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Problem 1: The effects of financial leverage depend on the operating earnings of the company. Based on this relationship, assume you graph the EPS and EBI for a firm, while ignoring taxes. Which one of these statements correctly states a relationship illustrated by the graph?

A. Financial leverage decreases the slope of the EPS line.
B. Below the break-even point unlevered structures have a lower EPS for every dollar of EBI than levered structures do.
C. Above the break-even point the increase in EPS for unlevered structures is greater than that of levered structures for every dollar increase in EBI.
D. Leverage only provides value above the break-even point.
E. Above the break-even point, the unlevered structure is preferred.

Reference no: EM132965127

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