Question: Explain how each of the following changes will affect a company's range of earnings chart such as that shown in Figure. Which changes would make

Explain how each of the following changes will affect a company's range of earnings chart such as that shown in Figure. Which changes would make increased financial leverage more attractive? Which would make it less attractive?

a. An increase in the interest rate on the new debt to be raised.
b. An increase in the company's stock price.
c. Increased uncertainty about the issuing company's future earnings.
d. Increased cash dividends paid on common stock.
e. An increase in the amount of debt the company already has outstanding.

25% inancing 20% rn 15% Crossover point EBIT $110 million-' Stock inancing 10% 25% higher ROE with bonds 5% t ri 0% 50 100 150 200 250 300 350400 450 Earnings before interest and taxes (EBIT) (S milli(111%) 5%

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