Above the EBIT-EPS indifference point,a more heavily levered financial plan will produce greater EPS.

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Quizplus · Accepted Answer

This statement is true as the EBIT-EPS indifference point represents the level of EBIT at which two different financial plans (one with higher leverage and one with lower leverage) will produce the same EPS. Beyond this point, a more heavily levered financial plan (i.e. one with higher debt and lower equity) can amplify the impact of EBIT on EPS, resulting in higher EPS compared to a less levered financial plan.

Above the EBIT-EPS Indifference Point,a More Heavily Levered Financial Plan