What Should the Firm's Target Capital Structure Be Set to Do

question 20

Multiple Choice

What should the firm's target capital structure be set to do?

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

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Definitions:

Government of a Country

The organization that is the governing authority of a political unit, responsible for creating and enforcing laws, managing public resources and services, and protecting the rights of its citizens.

Fiscal Policy

Government policies regarding taxation and spending that influence economic conditions.

Lower Taxes

The reduction of tax rates or tax burdens to encourage economic activities or provide relief to taxpayers.

Increased Government Spending

A fiscal policy where the government expands its expenditures to stimulate economic growth or address public needs.