Explain how each of the following changes will affect a companys range of earnings chart such as that shown in Figure 6.2. 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 companys stock price.

c. Increased uncertainty about the issuing companys future earnings.

d. Increased cash dividends paid on common stock.

e. An increase in the amount

FIGURE Range of Earnings Chart for Sensient Technologies Corporation 25% T Bond financing 5% Crossover point EBIT-S110 million Stock 10% financing 25% higher ROE with 5% bonds 50 100 150 200 250 300 350 400 450 Eamings before interest and taxes (EBIT) (S millions) 5%