As a general rule, the capital structure that maximizes stock price also:
A)minimizes the weighted average cost of capital
B)maximizes the weighted average cost of capital
C)minimizes the required rate of return on equity
D)maximizes the cost of debt

Question

Quizplus · Accepted Answer

The capital structure that maximizes stock price is typically achieved by minimizing the weighted average cost of capital (WACC). This is because WACC represents the minimum return that must be earned on investments to satisfy all stakeholders, including equity investors. Minimizing WACC therefore allows the company to fund its operations and growth with the lowest possible cost of capital, which in turn maximizes profits and stock price.

As a General Rule, the Capital Structure That Maximizes Stock