The Firm's Target Capital Structure Should Do Which of the Following

question 84

Multiple Choice

The firm's target capital structure should do which of the following?

• A) Maximize the earnings per share (EPS).
• B) Minimize the cost of debt (r_d).
• C) Obtain the highest possible bond rating.
• D) Minimize the cost of equity (r_s).
• E) Minimize the weighted average cost of capital (WACC).

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Definitions:

Tax Incidence

The analysis of the effect of a particular tax on the distribution of economic welfare, essentially who bears the burden of a tax.

Buyers

Individuals or organizations that purchase goods or services for personal use, resale, or as inputs in the production of other goods.

Sellers

Individuals or entities that offer goods or services for sale in the marketplace.

Progressive

A term describing a tax system where the tax rate increases as the taxable amount increases, or broadly referring to policies or principles aiming at promoting social advancement.