Which of the Following Statements Regarding Optimal Capital Structure Is

question 25

Multiple Choice

Which of the following statements regarding optimal capital structure is true?

• A)A firm that is not operating at its optimal capital structure is likely to be acquired by another firm that can earn arbitrage profits by purchasing the firm at a low market price
• And making the necessary adjustments to it capital structure.
• B)The optimal capital structure tends to change as a firm's market value changes.
• C)The optimal capital structure is elusive and largely irrelevant, and managers can spend their time better on other issues.
• D)None of the above is a true statement.

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Definitions:

Directional Hypothesis

A hypothesis that specifies the direction of the expected difference or relationship.

Null Hypothesis

The null hypothesis is a statement suggesting that no statistical significance exists in a set of given observations, representing a default position that there is no association between two measured phenomena.

Type II Error

The error made when a false null hypothesis is not rejected, missing the detection of a real effect.

Type I Error

The mistake of rejecting the null hypothesis when it is actually true.