1. Is it possible for a firm to have a high degree of operating leverage and a low level of business risk? Explain.
2. Is it possible for a firm to have a high degree of combined leverage and a low level of total risk? Explain.
3. What are the major limitations of EBIT-EPS analysis as a technique to determine the optimal capital structure?
4. In practice, how can a firm determine whether it is operating at (or near) its optimal capital structure?