Which one of the following statements is correct concerning the relationship between a levered and an unlevered capital structure? Assume there are no taxes.
a. At the break-even point, there is no advantage to debt.
b. The earnings per share will equal zero when EBIT is zero for a levered firm.
c. The advantages of leverage are inversely related to the level of EBIT.
d. The use of leverage at any level of EBIT increases the EPS.
e. EPS are more sensitive to changes in EBIT when a firm is unlevered

In the case when we concerned about the relationship between the levered and an unlevered capital structure also there is no taxes so the statement i.e. correct is at the break even point we dont have an advantage with respect to the debt

Therefore the first option is correct

Answer Link

marvineetesh3 marvineetesh3 · Answer 2 · 2022-04-12T14:05:44+02:00

The statement about the relationship between a levered and an unlevered capital structure is valid in that debt has no advantage at the break-even point.

What is a break-even point?

Break-even point is the market condition where there is no profit and no loss to the company.

Here, the total revenue and the total cost of the firm equals.

When it comes to the relationship between a levered and an unlevered capital structure, there are no taxes, hence the statement, i.e., correct, is that at the break-even point, we don't have a debt advantage.

Therefore, option A is correct.

Learn more about the break-even point, refer to:

https://brainly.com/question/15356272