In an EPS-EBI graphical relationship,the debt line and the no debt line intersect.Which of these are true at the intersection point?
I.The advantages of debt outweigh the disadvantages of debt.
II.The aftertax earnings of both capital structures are equal.
III.The earnings per share for both capital structures are equal.
IV.There is no advantage or disadvantage to debt.
A)I and III only
B)II and IV only
C)III and IV only
D)I,II,and III only
E)II,III,and IV only

Question

Quizplus · Accepted Answer

At the intersection point, the earnings per share (EPS) for both capital structures (debt and no debt) are equal, and there is no advantage or disadvantage to using debt.

In an EPS-EBI Graphical Relationship,the Debt Line and the No