Which of the following statements is correct? a. the use of debt financing will tend to lower the basic earning power ratio, other things held constant. b. a firm that employs financial leverage will have a higher equity multiplier than an otherwise identical firm that has no debt in its capital structure. c. if two firms have identical sales, interest rates paid, operating costs, and assets, but differ in the way they are financed, the firm with less debt will generally have the higher expected roe. d. the numerator used in the tie ratio is earnings before taxes (ebt). ebt is used because interest is paid with post-tax dollars, so the firm's ability to pay current interest is affected by taxes. e. all else equal, increasing the total debt to total capital ratio will increase the roa.

Make or buy eastside company incurs a total cost of $120,000 in producing 10,000 units of a component needed in the assembly of its major product. the component can be purchased from an outside supplier for $11 per unit. a related cost study indicates that the total cost of the component includes fixed costs equal to 50% of the variable costs involved. a. should eastside buy the component if it cannot otherwise use the released capacity? present your answer in the form of differential analysis. use negative sign represent a net disadvantage answer; otherwise do not use negative signs with your answers. cost from outside supplier $answer variable costs avoided by purchasing answer net advantage (disadvantage) to purchase alternative $answer b. what would be your answer to requirement (a) if the released capacity could be used in a project that would generate $50,000 of contribution margin? use negative sign represent a net disadvantage answer; otherwise do not use negative signs with your answers.