Explain how each of the following changes will affect a company’s range of earnings chart...

Explain how each of the following changes will affect a company’s range of earnings chart such as that shown in Figure. Which changes would make increased financial leverage more attractive? Which would make it less attractive?

a. An increase in the interest rate on the new debt to be raised.

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b. An increase in the company’s stock price.

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c. Increased uncertainty about the issuing company’s future earnings.

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d. Increased cash dividends paid on common stock.

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e. An increase in the amount of debt the company already has out standing

FIGURE

Range of Earnings Chart for Sensient Technologies Corporation