A Firm Should Select the Capital Structure Which

question 39

Multiple Choice

A firm should select the capital structure which:

• A) produces the highest cost of capital.
• B) maximizes the value of the firm.
• C) minimizes taxes.
• D) is fully unlevered.
• E) has no debt.

---

Definitions:

Indirect Costing

A method of accounting that allocates indirect costs to products or services, often used in costing overheads.

EBITDA

Term for earnings before interest, taxes, depreciation, and amortization; operating income expressed by adding back depreciation and amortization expense.

Operating Income

The profit realized from a business's operations after deducting operating expenses from gross profit.

Income Tax

A tax levied by governments on individuals or entities based on their income or profits.