Because risk premiums increase with increases in financial leverage, the maximization of EPS does not assure owners' wealth maximization.

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The maximization of EPS (earnings per share) does not necessarily lead to the maximization of owners' wealth because as financial leverage increases, the risk premiums also increase, putting the owners' wealth at risk. Therefore, it is important to consider not just EPS but also risk and financial leverage when making decisions about the company's capital structure.

Because Risk Premiums Increase with Increases in Financial Leverage, the Maximization