The ________ Approach to Capital Structure Proposes That an Optimal

question 199

Multiple Choice

The ________ approach to capital structure proposes that an optimal capital structure be selected which ________.

• A) M and M; maximizes the weighted average cost of capital
• B) traditional; minimizes the cost of debt
• C) EBIT-EPS; maximizes the EPS
• D) residual theory; minimizes dividends

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Definitions:

Reconstruction Bias

a type of cognitive bias that involves memory errors in which individuals may add or omit details in their recollection of events.

Overconfidence Bias

The tendency to hold a subjective belief unreasonably confidently, making someone believe their ability, or the accuracy of their information, is higher than it actually is.

Confirmation Bias

The bias towards finding, interpreting, selecting, and recollecting evidence in ways that validate one's prior beliefs or notions.

Hindsight Bias

The tendency to believe, after learning an outcome, that one would have foreseen it, known also as the "I-knew-it-all-along" effect.