All of the Following Statements Regarding Capital Structure Weights in the WACC

question 21

Multiple Choice

All of the following statements regarding capital structure weights in the WACC equation are correct except:

• A)The weights represent a specific intended financing mix.
• B)These target weights represent a mix of debt and equity that the firm will try to achieve or maintain over the planning horizon.
• C)As much as possible, the target weights should reflect the combination of debt and equity that management believes will minimize the firm's weighted average cost of capital.
• D)The firm should make an effort over time to move toward and maintain its target capital structure mix of debt and equity.
• E)All of the above statements are correct.

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Definitions:

Eruption Column

A column of hot volcanic ash and gas ejected into the atmosphere during an explosive volcanic eruption.

Felsic

Describes igneous rocks that are rich in light-colored minerals such as quartz and feldspars.

Volcanic Breccia

A type of rock composed of large volcanic fragments, often formed during explosive volcanic eruptions.

Pyroclastic Flow

A fast-moving current of hot gas and volcanic materials (such as ash and lava fragments) that flows along the ground after an eruption, capable of causing destruction.