Which of the following would be considered the firm's optimal capital structure?
A) Stock Price = $25, Earnings Per Share = $10, Cost of Equity Capital = 15%
B) Stock Price = $23, Earnings Per Share = $11, Cost of Equity Capital = 18%
C) Stock Price = $24, Earnings Per Share = $12, Cost of Equity Capital = 17%
D) Stock Price = $20, Earnings Per Share = $12, Cost of Equity Capital = 20%

Question

Quizplus · Accepted Answer

The optimal capital structure is the one that balances between risk and return to maximize stock price and minimize the cost of capital. Option A has the highest stock price and a moderate cost of equity capital, indicating a balance that could be considered optimal.

Which of the Following Would Be Considered the Firm's Optimal