According to the Following Information, What Is the Firm's Optimal

question 4

Multiple Choice

According to the following information, what is the firm's optimal capital structure?     $\begin{array}{ccc}\text { Proportion } & \text { Earnings Per } & \text { Weighted Average Cost } \\\text { of Debt } & \text { Share (EPS) } & \text { of Capital (WACC) } \\\hline 30 \% & \$ 2.50 & 13.2 \% \\40 & 3.80 & 12.7 \\50 & 4.75 & 12.4 \\60 & 5.25 & 12.8\end{array}$

• A)30%
• B)40%
• C)50%
• D)60%
• E)To determine the optimal capital structure, the market value of the stock must be known.

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Definitions:

Box-and-Whisker Plots

A graphical representation of data that displays the distribution, median, quartiles, and outliers of a dataset.

Key Statistics

Important or crucial numerical information that helps summarize, analyze, or interpret data or phenomena.

Data Set

A collection of related sets of information that is composed of separate elements but can be manipulated as a unit by a computer.

Chebyshev's Theorem

A statistical theorem stating that for any real-valued random variable, a minimum proportion of values fall within a certain number of standard deviations from the mean, regardless of the shape of the distribution.