Question

A firm's optimal capital structure occurs where? Select one: a. Stock price is maximized, and EPS are maximized. b. Stock price is maximized, and WACC is maximized. c. EPS are maximized, and WACC is minimized. d. WACC is minimized, and stock price is maximized.

Answer 1

A firm's optimal capital structure occurs where WACC is minimized and stock price is maximized.

The correct answer is D

Step-by-step explanation:

Optimal capital structure exists where the market value of a firm is maximum and WACC is minimum. Optimal capital structure relates to net income approach to capital structure.