Following Are the Results of the Capital Structure Analysis SoCal

question 12

Multiple Choice

Following are the results of the capital structure analysis SoCal Irrigation just completed:    
$$\begin{array} { c c c } \begin{array} { c } \text { Proportion } \\\text { of Debt }\end{array} & \begin{array} { c } \text { Stock Price } \\\text { (per share) }\end{array} & \begin{array} { c } \text { Earnings per } \\\text { Share (EPS) }\end{array} \\\hline 20 \% & \$ 44.50 & \$ 1.20 \\40 & 45.15 & 1.26 \\60 & 45.20 & 1.22 \\80 & 44.95 & 1.18\end{array}$$
According to this information, what is SoCal's optimal capital structure?

• A)20%
• B)40%
• C)60%
• D)80%
• E)To determine the optimal capital structure, the market value of the stock must be known.

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