All of the following statements are correct except:
A)The firm's optimum debt/equity mix maximizes the firm's cost of capital,which in turn helps the firm to maximize shareholder wealth
B)A firm's mix of debt and equity used to finance its assets defines the firm's working capital structure.
C)A nonoptimal capital structure with either too much or too little debt leads to lower financing costs,and the firm will likely reject some capital budgeting projects that could have increased shareholder wealth with an optimal financing mix.
D)A project's NPV represents the decrease in shareholders' wealth from undertaking a project;thus,a lower weighted average cost of capital gives higher project net present values and results in higher levels of shareholder wealth.
E)None of the above statements are correct.

Question

Quizplus · Accepted Answer

The Answer of All of the following statements are correct except:
A)The firm's optimum debt/equity mix maximizes the firm's cost of capital,which in turn helps the firm to maximize shareholder wealth
B)A firm's mix of debt and equity used to finance its assets defines the firm's working capital structure.
C)A nonoptimal capital structure with either too much or too little debt leads to lower financing costs,and the firm will likely reject some capital budgeting projects that could have increased shareholder wealth with an optimal financing mix.
D)A project's NPV represents the decrease in shareholders' wealth from undertaking a project;thus,a lower weighted average cost of capital gives higher project net present values and results in higher levels of shareholder wealth.
E)None of the above statements are correct.

All of the Following Statements Are Correct Except