Which of the Following Statements Best Describes the Optimal Capital

question 69

Multiple Choice

Which of the following statements best describes the optimal capital structure?

• A) The optimal capital structure is the mix of debt,equity,and preferred stock that maximizes the company's earnings per share (EPS).
• B) The optimal capital structure is the mix of debt,equity,and preferred stock that maximizes the company's stock price.
• C) The optimal capital structure is the mix of debt,equity,and preferred stock that minimizes the company's cost of equity.
• D) The optimal capital structure is the mix of debt,equity,and preferred stock that minimizes the company's cost of debt.
• E) The optimal capital structure is the mix of debt,equity,and preferred stock that minimizes the company's cost of preferred stock.

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Definitions:

Income

Monetary gain derived from work, investments, business, or other sources intended to fund personal expenditures.

Tax

A mandatory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Utility Function

A rephrased definition: A tool in economics to quantify an individual's satisfaction from consuming different bundles of goods and services.

Price

The sum of money needed to buy a product or service.