Which of the following statements is CORRECT?

Question

Quizplus · Accepted Answer

The optimal capital structure is the mix of debt and equity that minimizes the WACC (weighted average cost of capital), which in turn maximizes the stock price. Therefore, option D is correct. Option A is incorrect because although maximizing EPS is important, it may not necessarily result in minimizing the WACC. Option B is incorrect because minimizing the cost of equity alone does not necessarily result in maximizing the stock price. Option C is incorrect because it is not feasible to simultaneously minimize all costs involved in capital structure decisions. Option E is incorrect because maximizing EPS alone may not result in maximizing the stock price.

Which of the Following Statements Is CORRECT