Which of the following statements is correct?
A) As a rule,the optimal capital structure is found by determining the debt-equity mix that maximizes expected EPS.
B) The optimal capital structure simultaneously maximizes EPS and minimizes the WACC.
C) The optimal capital structure minimizes the cost of equity,which is a necessary condition for maximizing the stock price.
D) The optimal capital structure simultaneously minimizes the cost of debt,the cost of equity,and the WACC.
E) Each of the above statements is false.

Question

Quizplus · Accepted Answer

None of the statements accurately describe the optimal capital structure, which is primarily about minimizing the WACC to maximize the firm's value, not necessarily maximizing EPS or minimizing individual costs of capital.

Which of the Following Statements Is Correct