The Firm's Target Capital Structure Should Be Consistent with Which

question 54

Multiple Choice

The firm's target capital structure should be consistent with which of the following statements?

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

---

Definitions:

Skin Effect

The tendency of an alternating electrical current to become distributed within a conductor such that the current density is largest near the surface of the conductor, and decreases with greater depths in the conductor.

Eddy Currents

Circulating currents induced within conductors by a changing magnetic field, often leading to energy loss.

Insulation

Material used to prevent the passage of electricity, heat, or sound from one area or substance to another by providing a barrier or covering.

Embargo Act 1807

A law passed by the U.S. Congress prohibiting American ships from trading in foreign ports, aiming to coerce Britain and France into respecting U.S. neutrality during their wars.