From the Information Below,select the Optimal Capital Structure for Mountain

question 107

Multiple Choice

From the information below,select the optimal capital structure for Mountain High Corp.

• A)Debt = 40%;Equity = 60%;EPS = $2.95;Share price = $26.50
• B)Debt = 50%;Equity = 50%;EPS = $3.05;Share price = $28.90
• C)Debt = 60%;Equity = 40%;EPS = $3.18;Share price = $31.20
• D)Debt = 80%;Equity = 20%;EPS = $3.42;Share price = $30.40
• E)Debt = 70%;Equity = 30%;EPS = $3.31;Share price = $30.00

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Definitions:

Heuristics

Mental shortcuts or rules of thumb that simplify decision making and problem solving, although not always perfectly accurate.

Creativity

The ability to produce original and unusual ideas, or to make something new or imaginative.

Sunk-Cost Fallacy

A cognitive error where past investments of time, effort, or money are taken into account when making a decision, even though they cannot be recovered.

Loss Aversion

The tendency to strongly prefer to avoid losses compared to attempting to acquire gains.