The Optimal Capital Structure Will Always Be Lower Than the Debt/assets

question 73

Multiple Choice

The optimal capital structure will always be lower than the debt/assets ratio that maximizes the _____.

• A) expected EPS
• B) weighted average cost of capital
• C) beta coefficients
• D) degree of financial leverage
• E) net operating income

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Definitions:

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment’s cost.

Annual Net Cash Inflow

The net amount of cash that flows into a company within a one-year period after all expenditures are subtracted.

Residual Value

The estimated amount for which an asset is expected to be sold at the end of its useful life, after deducting expected costs of disposal.

Useful Life

Useful life is the estimated period that an asset is expected to be usable for its intended purpose, influencing depreciation and amortization calculations.