Asked by Geneva Brems on Jul 02, 2024
Which of the following statements best describes capital structure?
A) The capital structure that maximizes expected EPS also maximizes the price per share of common shares.
B) The capital structure that minimizes the interest rate on debt also maximizes the expected EPS.
C) The capital structure that minimizes the required return on equity also maximizes the share price.
D) The capital structure that minimizes the WACC also maximizes the price per share of common shares.
Capital Structure
The mixture of debt and equity financing a company uses to fund its operations and growth.
Expected EPS
Estimated Earnings Per Share, forecasting a company's profitability on a per share basis.
Share Price
The price of a single share of a company's stock.
- Learn about the influence of capital structure on the risk and cost of capital for a firm.
- Discover and investigate the most favorable capital structure and its consequences on the worth of a firm.
Learning Objectives
- Learn about the influence of capital structure on the risk and cost of capital for a firm.
- Discover and investigate the most favorable capital structure and its consequences on the worth of a firm.
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