Which of the Following Statements Is CORRECT

question 68

Multiple Choice

Which of the following statements is CORRECT?

• A) As a rule,the optimal capital structure is found by determining the debt-equity mix that maximizes expected EPS.
• B) The optimal capital structure simultaneously maximizes EPS and minimizes the WACC.
• C) The optimal capital structure minimizes the cost of equity,which is a necessary condition for maximizing the stock price.
• D) The optimal capital structure simultaneously minimizes the cost of debt,the cost of equity,and the WACC.
• E) The optimal capital structure simultaneously maximizes the stock price and minimizes the WACC.

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Definitions:

Stock Split

A corporate action where a company divides its existing shares into multiple shares to boost the liquidity of the shares, though the overall value of the company remains the same.

Market Value

The market price at which an asset or service can be transacted currently.

Shares Outstanding

The total number of shares of a corporation that have been authorized, issued, and purchased by investors and are held by them.

Debt-Equity Ratio

A metric indicating the balance between shareholders' equity and debt in financing a company's assets.