When EBIT is positive, 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.
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Q2: The equity beta of a firm depends
Q3: There appears to be some connection between
Q4: When a firm is operating at its
Q5: All else the same, taxes and bankruptcy
Q6: All else equal, higher financial leverage decreases
Q7: Tax rate will affect the optimal level
Q8: When a firm is operating at its
Q9: Volatility of earnings will affect the optimal
Q10: When EBIT is positive, increasing financial leverage
Q11: Assume there are no personal or corporate
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