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)The optimal capital structure simultaneously maximizes stock price and minimizes the WACC.

Question

Quizplus · Accepted Answer

The optimal capital structure is the one that maximizes the stock price and minimizes the weighted average cost of capital (WACC), as this balance optimizes the firm's value.

Which of the Following Statements Is CORRECT