A firm's optimal capital structure occurs where?
A) EPS are maximized, and WACC is minimized.
B) Stock price is maximized, and EPS are maximized.
C) Stock price is maximized, and WACC is maximized.
D) WACC is minimized, and stock price is maximized.

Question

Quizplus · Accepted Answer

The optimal capital structure is achieved when the Weighted Average Cost of Capital (WACC) is minimized, leading to the maximization of the firm's stock price. This balance ensures the lowest cost of capital and the highest firm value.

A Firm's Optimal Capital Structure Occurs Where