The Optimal Capital Structure Has Been Achieved When The

question 42

Multiple Choice

The optimal capital structure has been achieved when the:

• A) Debt-equity ratio is equal to 1.
• B) Weight of equity is equal to the weight of debt.
• C) Cost of equity is maximized given a pre-tax cost of debt.
• D) Debt-equity ratio is such that the cost of debt exceeds the cost of equity.
• E) Debt-equity ratio selected results in the lowest possible weighed average cost of capital.

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Definitions:

Alternative Hypothesis

A statement that directly contradicts the null hypothesis by stating there is a statistically significant effect or difference.

Null Hypothesis

A statistical hypothesis that assumes no significant difference or effect, serving as a default position that there is no relationship between two measured phenomena.

Alternative Hypothesis

A hypothesis that contradicts the null hypothesis, typically representing a new theory or perspective.

Null Hypothesis

A statistical hypothesis that assumes no significant difference or effect exists among the variables being studied.