As a General Rule, the Optimal Capital Structure

question 105

Multiple Choice

As a general rule, the optimal capital structure

• A) maximizes expected EPS and also maximizes the price per share of common stock.
• B) minimizes the interest rate on debt and also maximizes the expected EPS.
• C) minimizes the required rate on equity and also maximizes the stock price.
• D) maximizes the price per share of common stock and also minimizes the weighted average cost of capital.

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Definitions:

Trade Alliance

An agreement between two or more parties, often countries or companies, to foster trade and economic cooperation.

Venture Capitalists

Investors who provide capital to startup companies and small businesses with perceived long-term growth potential in exchange for equity.

Management Role

A Management Role encompasses the responsibilities and duties exercised by an individual in a managerial position to plan, organize, lead, and control resources to achieve specific objectives.

Investment Bankers

Professionals who advise companies on financial matters, including mergers and acquisitions, and help them to raise capital by issuing stocks or bonds.