Question: JKL Corp. is choosing between two capital structures: one is all equity and the other is a mix of debt and equity. The firm has

JKL Corp. is choosing between two capital structures: one is all equity and the other is a mix of debt and equity. The firm has just calculated that the breakeven EBIT between the two capital structures is $400,000. If the firm expects its earnings to be $500,000 for the foreseeable future, which capital structure should the firm choose? A) They should choose the capital structure with only equity because EPS will be higher. B) They should choose the capital structure with equity and debt because EPS will be higher. C) They should choose the capital structure with equity and debt because EPS will be lower. D) They should choose the capital structure with only equity because EPS will be lower. E) They are indifferent between the two capital structures.

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