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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Definitions:

Sociocultural Considerations

Aspects of social and cultural contexts that influence behaviors, practices, and policies, recognizing the impact of societal and cultural factors.

Economic Security

The condition of having stable income or other resources to support a standard of living now and in the foreseeable future.

Underemployment

A situation in which workers are employed in positions requiring less education and skill than they have.

Productivity

A measure of the efficiency of production, often calculated as the ratio of outputs produced to inputs used.