In the MM Model, the Mix of Debt and Equity

question 191

Multiple Choice

In the MM model, the mix of debt and equity that minimizes the cost of capital is the:

• A)optimal corporate structure.
• B)target financial structure.
• C)optimal capital structure.
• D)optimal degree of combined leverage.

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Definitions:

Standard Cost System

An accounting method where costs are predetermined for product costing, facilitating variance analysis between expected and actual costs.

Fixed Manufacturing Overhead

Indirect costs associated with manufacturing that do not vary with the level of production, such as salaries of managers and depreciation of factory equipment.

Variances

The difference between expected and actual figures in budgeting and financial forecasting.

Direct Labor-Hours

The complete count of hours expended by personnel directly part of the process in making a product or providing a service.