For a Manager Attempting to Determine the Optimal Capital Structure

question 11

Multiple Choice

For a manager attempting to determine the optimal capital structure of a firm,which of the following is most accurate?

• A)It is a fruitless endeavor and should be discouraged based on the conservation of value principle.
• B)The best place to start is by examining the capital structures of the industry peer group of the company.
• C)Well-defined algorithms exist that high-priced consulting firms use,and their cost is generally justified in terms of the potential value creation.
• D)The best place to start is with a Monte Carlo simulation of possible market movements and their effects on the capitalization weights and the value of the firm.