Levered and an unlevered capital structure

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Reference no: EM131337968

You have computed the break-even point between a levered and an unlevered capital structure. Assume there are no taxes. At the break-even level, the:

firm is just earning enough to pay for the cost of the debt.

firm's earnings before interest and taxes are equal to zero.

earnings per share for the levered option are exactly double those of the unlevered option.

advantages of leverage exceed the disadvantages of leverage.

firm has a debt-equity ratio of .50.

Reference no: EM131337968

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