In the EBIT-EPS approach to capital structure, a constant level of EBI

In the EBIT-EPS approach to capital structure, a constant level of EBIT is assumed ________.

A) to ease the calculations of owners’ equity
B) to isolate the impact on returns of the financing costs associated with alternative capital structures
C) to emphasize the relationship between interest expenses and taxes
D) to concentrate on the effect of revenue and expense on capital structure decisions

ANSWER

B