As a General Rule, the Optimal Capital Structure Is the One

question 71

Multiple Choice

As a general rule, the optimal capital structure is the one that:

• A) maximizes expected EPS and the price per share of common stock.
• B) minimizes the interest rate on debt and maximizes the expected earnings per share.
• C) minimizes the required rate on equity and maximizes the stock price.
• D) maximizes the price per share of common stock and minimizes the weighted average cost of capital.
• E) minimizes the expected earnings per share and maximizes the weighted average cost of capital.

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Definitions:

Actual Value

The real value observed or measured, as opposed to an estimated or theoretical value.

Sample Mean

is the average value of a subset of observations from a larger population.

Sample Variance

Sample variance is a measure of the dispersion or variability of a sample dataset, calculating how much the numbers differ from the sample mean.

Consistent

A statistical property indicating that as the size of the sample increases, the estimator converges in probability to the parameter being estimated.