If a CFO Wants to Maintain a Targeted Capital Structure

question 13

Multiple Choice

If a CFO wants to maintain a targeted capital structure, she should

• A)repurchase shares when the firm's stock price has increased considerably.
• B)issue more equity when the firm's stock price has increased considerably.
• C)issue more debt whenever interest rates fall, and retire debt when interest rates rise.
• D)both A and B.

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Definitions:

Risk Averse Manager

A manager who prioritizes minimizing risks in decision-making and strategy, favoring safer investments with potentially lower returns.

Discount Rate

The interest rate used to discount future cash flows of a financial asset to their present value, often used in NPV calculations.

Revenue

The sum of money earned from the sale of products or services that are the main activities of a business.

Interest Rate

The percentage charged on a loan or earned through an investment, representing the cost of borrowing or the return on invested capital.