Question: The increase in risk to shareholders when financial leverage is introduced is best evidenced by: (Which multiple choice below is the correct answer?) 1. the

The increase in risk to shareholders when financial leverage is introduced is best evidenced by:

(Which multiple choice below is the correct answer?)

1. the increase in taxes.

2. higher EPS as EBIT increases.

3. increased use of homemade leverage.

4. decreasing earnings as EBIT increases.

5. a higher variability of EPS with debt than with all-equity financing.

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