An optimal capital structure is achieved
A) when a firm's expected profits are maximized.
B) when a firm's expected EPS are maximized.
C) when a firm's expected stock price is maximized.
D) when a firm's break-even point is achieved.

Question

Quizplus · Accepted Answer

An optimal capital structure is achieved when a firm's expected stock price is maximized. This is because the stock price reflects the present value of future cash flows to shareholders, and maximizing the stock price indicates that the firm is using its capital in the most efficient way possible to generate value for its shareholders.

An Optimal Capital Structure Is Achieved