Answer Happy

A negative effect of the increase in debt in the capital structure to control the agency problem can be: Select one: O a. the excessive payment of corporate taxes due to the high interest on the debt. O b. the excessive investment of managers in projects even with a low NPV. a O c. resulting in very high risk aversion in management, leading to little or almost no investment in capital projects, even with positive NPVs. This would cause stagnation or little growth of the firm. O d. a wrong signal that the firm is spreading the firm's risk among more shareholders.
What does indifference point mean in EBIT-EPS analysis? Select one: O a. The point of indifference refers to the level of EPS at which EBIT is the same regardless of the different capital structure alternatives that the company has. O b. The point of indifference refers to the level of EBIT at which the EPS is the same regardless of the different alternatives of capital structures that the company has. O c. It is the capital structure that maximizes the company's EPS for that period. O d. The indifference point shows the combination between the different sources of capital that maximize the value of the company measured by its EBIT.