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.

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Definitions:

Interest Rates

The expense incurred when obtaining a loan, typically represented as a percent of the total amount lent.

Stock Prices

The cost of purchasing a share of ownership in a company, which fluctuates based on market conditions and the company's performance.

Opposite Directions

This term typically describes movements or trends in markets, investments, or analyses that are contrary to each other.

Efficient Market

A market in which securities' prices fully reflect all available information, meaning that assets are always properly valued.