Which of the Following Statements Is CORRECT

question 60

Multiple Choice

Which of the following statements is CORRECT?

• A) The capital structure that maximizes expected EPS also maximizes the price per share of common stock.
• B) The capital structure that minimizes the interest rate on debt also maximizes the expected EPS.
• C) The capital structure that minimizes the required return on equity also maximizes the stock price.
• D) The capital structure that minimizes the WACC also maximizes the price per share of common stock.
• E) The capital structure that gives the firm the best bond rating also maximizes the stock price.

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Definitions:

Employ

To hire or use the services of someone or something for a particular purpose or job.

Profit-maximizing

The process by which a firm determines the price and output level that returns the maximum profit.

Labor

Labor is the effort that people contribute to the production of goods and services, measured in terms of time worked, skill level, and productivity.

Nominal Wages

Wages expressed in current dollars, without adjustment for inflation or changes in the cost of living.