The Optimal Capital Structure Is the Mixture of Debt and Equity

question 118

Multiple Choice

The optimal capital structure is the mixture of debt and equity which

• A) Maximizes the value of the firm and Minimizes the firm's weighted average cost of capital.
• B) Maximizes the value of the firm and maximizes the market price of the firm's bonds.
• C) I. Maximizes the value of the firm. II. Minimizes the firm's weighted average cost of capital. III. Maximizes the market price of the firm's bonds.
• D) Minimizes the firm's weighted average cost of capital and maximizes the market price of the firm's bonds.
• E) Maximizes the firm's weighted average cost of capital and maximizes the market price of the firm's bonds.

---

Definitions:

Coercive Power

A form of power that is based on the ability to deliver punishments or remove rewards to influence others.

Rebellious

characterizes individuals or actions that resist control, authority, or tradition, often manifesting as a form of protest or dissent.

Discontinuity Effect

A phenomenon where intergroup interactions are more competitive or aggressive than interindividual interactions, often due to perceived group boundaries.

Abrupt Increases

Sudden and significant rises in the level, amount, or degree of something.