Which of the Following Statements Is Correct

question 1

Multiple Choice

Which of the following statements is correct?

• A) As a rule,the optimal capital structure is found by determining the debt-equity mix that maximizes expected EPS.
• B) The optimal capital structure simultaneously maximizes EPS and minimizes the WACC.
• C) The optimal capital structure minimizes the cost of equity,which is a necessary condition for maximizing the stock price.
• D) The optimal capital structure simultaneously minimizes the cost of debt,the cost of equity,and the WACC.
• E) Each of the above statements is false.

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Definitions:

Acquired

The process of obtaining control of another company by purchasing its stock or assets.

Initial Maturities

The onset period before a bond, note, or other financial instrument reaches its due date for payment.

T-Bills

Treasury Bills are short-term U.S. government debt obligations backed by the Treasury Department with a maturity of one year or less.

Marketable Money

Money or financial instruments that can be easily converted to cash without significant loss in value.