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EBIT-EPS Indifference Point is the EBIT at which:
AEPS is maximum
BEPS is the same under two alternative financing plans
CTax is zero
DDividend is the same
Answer & Solution
Correct answer: B. EPS is the same under two alternative financing plans
1. Indifference Point: EBIT level where two financing alternatives yield identical EPS.
2. At this EBIT, the choice of financing is indifferent.
3. Beyond it, the more leveraged plan yields higher EPS (and vice versa).
_Source: ICAI BoS CA Inter Paper 6A, Ch 5 "Financing Decisions — Capital Structure", §3_
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