(1) Under which of the following conditions would the usage of fixed costs in the operation of a business be most beneficial?

Select one:

A.

When a business is expanding, and sales revenues are rising.

B.

During an economic recession.

C.

When a business is expected to experience a period of declining sales.

D.

When interest rates are rising.

(2) Gold Enterprises is financed entirely with 3 million shares of common stock selling for RM20 a share. A new capital of RM4 million is needed for this year's capital budget. The additional funds can be raised with new stock (ignore dilution) or with 13% 10-year bonds. Gold's corporate tax rate is 40%. Based on the EBIT indifference point, what is the EPS for both plans?

Select one:

A. RM1.10

B. RM1.20

C. RM1.05

D. RM1.56