Which of the Following Statements Best Describes the Optimal Capital

question 69

Multiple Choice

Which of the following statements best describes the optimal capital structure?

• A) The optimal capital structure is the mix of debt,equity,and preferred stock that maximizes the company's earnings per share (EPS).
• B) The optimal capital structure is the mix of debt,equity,and preferred stock that maximizes the company's stock price.
• C) The optimal capital structure is the mix of debt,equity,and preferred stock that minimizes the company's cost of equity.
• D) The optimal capital structure is the mix of debt,equity,and preferred stock that minimizes the company's cost of debt.
• E) The optimal capital structure is the mix of debt,equity,and preferred stock that minimizes the company's cost of preferred stock.

---

Definitions:

Personal Costs

Expenses borne directly by an individual, including out-of-pocket payments and the opportunity costs of alternative actions.

Economic Activity

All activities related to the creation, dissemination, and use of products and services in an economy.

Scarce Resources

Resources that are limited in supply and cannot meet all the demands placed on them by humans.

Rational Decision

A rational decision is a choice made by comparing the anticipated outcomes, where the best possible result is selected based on some consistent criterion.