Which of the Following Statements Is CORRECT

question 58

Multiple Choice

Which of the following statements is CORRECT?

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

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Definitions:

Directional Selection

A form of natural selection in which one extreme phenotype is favored over other phenotypes, causing allele frequencies to shift in one direction.

Stabilizing Selection

Stabilizing selection favors individuals in the middle of the distribution of phenotypes present in a population (for example, by acting against individuals at either extreme).

Overdominance

A genetic phenomenon where the heterozygote genotype has a higher fitness or survival advantage than either of the homozygote genotypes.

Underdominance

A genetic condition in which heterozygotes have lower fitness than either homozygote, leading to a tension between alleles that can result in decreased population stability.