Based on the Information Below for Benson Corporation, What Is

question 67

Multiple Choice

Based on the information below for Benson Corporation, what is the optimal capital structure?

• A) Debt = 50%; Equity = 50%; EPS = $3.05; Stock price = $28.90.
• B) Debt = 60%; Equity = 40%; EPS = $3.18; Stock price = $31.20.
• C) Debt = 80%; Equity = 20%; EPS = $3.42; Stock price = $30.40.
• D) Debt = 70%; Equity = 30%; EPS = $3.31; Stock price = $30.00.
• E) Debt = 40%; Equity = 60%; EPS = $2.95; Stock price = $26.50.

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Definitions:

Batch-level Activities

Operations or tasks that are performed for each batch of products, regardless of the size of the batch.

Units

Generally refers to the quantitative measure of output or production in business operations.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products based on a certain activity base, such as labor hours or machine hours.

Activity-based Costing

A costing methodology that assigns overhead and indirect costs to specific activities, thereby providing more accurate product costing.