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

question 94

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 maximize 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.

---

Definitions:

Robert Cialdini

An American psychologist known for his work on the psychology of persuasion, compliance, and negotiation.

Self-handicapping

A cognitive strategy whereby individuals create obstacles and excuses for themselves to avoid self-blame when they do poorly.

Self-handicapping

A cognitive strategy by which people avoid effort in the hopes of keeping potential failure from hurting self-esteem.

Basking In Reflected Glory

A self-enhancement strategy where individuals associate themselves with successful others to improve their own self-esteem.