A Firm Sets a Target Capital Structure to Use When

question 60

Multiple Choice

A firm sets a target capital structure to use when raising new funds in an effort to:

• A)maximize its earnings per share (EPS).
• B)minimize its cost of debt (rd).
• C)maximize the dividend per share it pays commons stockholders.
• D)minimize its cost of equity (rs).
• E)minimize its weighted average cost of capital (WACC).

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Definitions:

Paid Agent

A professional or entity compensated to act on behalf of another in a transaction or negotiation.

Principal's Relationship

A legal concept that describes the relationship between a principal (one who grants authority) and an agent (one who acts on the principal's behalf).

Solely

Refers to something done exclusively by one entity or individual, without involvement from others.

Principal's Business

The main activities and operations undertaken by a business or organization to fulfill its objectives and generate revenue.