1.667 points\ You are comparing two possible capital structures for a firm. The first option is an all-equity firm. The second option involves the use of

$3.8million

of debt. The breakeven point between these two financing options occurs when the earnings before interest and taxes (EBIT) are

$428,000

. Given this, you know that leverage is beneficial to the firm:\ whenever EBIT is less than

$428,000

.\ only if the debt is increased by

$428,000

.\ only when EBIT is

$428,000

.\ whenever EBIT exceeds

$428,000

.\ only if the debt is decreased by

$428,000

.

You are comparing two possible capital structures for a firm. The first option is an all-equity firm. The second option involves the use of $3.8 million of debt. The breakeven point between these two financing options occurs when the earnings before interest and taxes (EBIT) are $428,000. Given this, you know that leverage is beneficial to the firm: whenever EBIT is less than $428,000. only if the debt is increased by $428,000. only when EBIT is $428,000. whenever EBIT exceeds $428,000. only if the debt is decreased by $428,000