The_________approach to Capital Structure Proposes That an Optimal Capital Structure

question 142

Multiple Choice

The_________approach to capital structure proposes that an optimal capital structure be selected which_________.

• A) M and M; maximizes the weighted average cost of capital
• B) residual theory; minimizes dividends
• C) EBIT-EPS; maximizes the EPS
• D) traditional; minimizes the cost of debt

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Definitions:

Public Relations Costs

Expenses related to managing the public image and communications of a company.

Fixed Cost Per Unit

The fixed costs of production (expenses that do not change with the level of output) divided by the number of units produced.

Relevant Range

The range of activity or volume over which the assumptions about variable and fixed costs are valid for budgeting and planning purposes.

Direct Manufacturing Cost

The sum of all direct costs associated with the production of goods, including labor and materials.