The Firm's Target Capital Structure Should Do Which of the Following

question 84

Multiple Choice

The firm's target capital structure should do which of the following?

• A) Maximize the earnings per share (EPS).
• B) Minimize the cost of debt (r_d).
• C) Obtain the highest possible bond rating.
• D) Minimize the cost of equity (r_s).
• E) Minimize the weighted average cost of capital (WACC).

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Definitions:

Federal Taxes

Taxes levied by the national government on income, property, sales, and other activities, used to fund public services and programs.

Automatic Stabilizers

Economic policies and programs, such as unemployment insurance and progressive taxes, that automatically adjust to stabilize economic fluctuations.

Business Cycle

The natural rise and fall of economic growth over time, characterized by periods of expansion, peak, contraction, and trough.

Federal Government

The national government of a federal country, where powers are divided between central authority and constituent political units, such as states or provinces.