Question

Which of the following statements best describes the optimal capital structure? The optimal capitalstructure is the mix of debt, equity, and preferred stock that maximizes the company's ____.A. stock price.B. cost of equity.C. cost of debt.D. cost of preferred stock.E. earnings per share (EPS).

Answer 1

Answer:

The correct answer is a) stock price.

Explanation:

The optimal capital structure is the mix of debt, equity, and preferred stock that maximizes the company's stock price. Debt financing supposes a low cost of capital, debt financing raises the risk to shareholders. In conclusion, the enterprise should find an equilibrium point to avoid a crisis.