Question

Explain the mechanism of determining the indifference level of ebit under different combinations of optimal financing plans?

Answer 1

the mechanism of determining the indifference level of ebit under different combinations of optimal financing plans is basically based on desotiation

Answer 2

It is the EPS or the earning per share that determines the indifference level of EBIT while comparing two financial plans.

Beyond the level of EBIT, the indifference point leverage begins.

If the indifference point level is more than the EBIT, then one can get more advantage of the equity capital and less on the debt capital.