Suppose you were to draw a graph in which the horizontal axis gave possible EBIT figures, and the vertical axis held values for EPS. If you were to compare the graphs for a levered firm versus an unlevered firm, which of the following is TRUE? There are no taxes.
◦ The levered firm has a higher y-axis intercept and a lower slope value than does the unlevered firm.
◦ The levered firm has a higher y-axis intercept and a higher slope value than does the unlevered firm.
◦ The levered firm has a lower y-axis intercept and a higher slope value than does the unlevered firm.
◦ The levered firm has a lower y-axis intercept and a lower slope value than does the unlevered firm.
◦ The two graphs will be identical for the levered and unlevered firms.