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:

Environmental Complexity

The magnitude of the problems and opportunities in the organization’s environment as evidenced by the degree of richness, interdependence, and uncertainty.

Component Factors

The individual elements or aspects that collectively form a system, process, or outcome, each contributing to its functionality or success.

Output Controls

Management mechanisms focused on measuring and managing the results of an organization's activities rather than the activities themselves.

Process Controls

Mechanisms or procedures put in place within an organization to guide, monitor, and regulate ongoing processes to ensure they meet desired standards and objectives.