The Capital Structure That Minimises the Weighted Average Cost of Capital

question 113

Multiple Choice

The capital structure that minimises the weighted average cost of capital will also

• A)maximise EPS for any given level of EBIT.
• B)minimise the value of the firm.
• C)minimise bankruptcy costs.
• D)maximise the price per share of ordinary shares.

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Definitions:

Absolute Value

Refers to the distance of a number from 0 on the number line, without considering direction.

Correlation Coefficient

A statistical index measuring the strength and direction of a linear relationship between two variables.

Average Error

A statistical measure that averages the absolute differences between the observed values and the values predicted by a model.

Independent Variable

The variable that is manipulated in an experiment to observe its effect on the dependent variable.