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EBIT-EPS Analysis, Indifference Curve, Risk Factors and Basic Short Comings

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What is EBIT-EPS analysis?

What is the indifference curve?

How is risk factored into the EBIT-EPS analysis?

What are the "basic short comings" of EBIT's analysis?

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The solution explains various aspects of the EBIT-EPS analysis in 360 words.

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What is EBIT-EPS analysis? What is the indifference curve? How is risk factored into the EBIT-EPS analysis? What are the "basic short comings" of EBIT's analysis?

An EBIT -EPS analysis is done to understand the impact on EPS of various funding options. A firm may want to raise capital and may wish to evaluate the impact on EPS of how the capital is raised - different debt amounts at different rates or equity financing - common stock or preferred. In the EBIT-EPS analysis we assume a given level of EBIT and ...

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