Which of the following statements is true ofthe optimal capital structure?
A) It is found by determining the debt-equity mix that maximizes expected EPS.
B) It simultaneously maximizes EPS and minimizes the WACC.
C) It minimizes the cost of equity, which is a necessary condition for maximizing the stock price.
D) It simultaneously minimizes the cost of debt, the cost of equity, and the WACC.
E) It should have the combination of debt and equity thatwill maximize the price of the firm's stock.

Question

Quizplus · Accepted Answer

The optimal capital structure is the mix of debt and equity that maximizes the firm's stock price, as it reflects the best trade-off between risk and return for shareholders.

Which of the Following Statements Is True Ofthe Optimal Capital