1. Which of the following statements is CORRECT?
a. The capital structure that maximizes expected EPS also maximizes the price per share of common stock.
b. The capital structure that minimizes the interest rate on debt also maximizes the expected EPS.
c. The capital structure that minimizes the required return on equity also maximized the stock price.
d. The capital structure that minimized the WACC also maximizes the price per share of common stock.
e. The capital structure that gives the firm the best bond rating also maximizes the stock price.
2. Based on the information below, what is the firm’s optimal capital structure?
a. Debt= 40%; Equity= 60%; EPS= $2.95; Stock= $26.50
b. Debt= 50%; Equity= 50%; EPS= $3.05; Stock= $28.90
c. Debt= 60%; Equity= 40%; EPS= $3.18; Stock= $31.20
d. Debt= 80%; Equity= 20%; EPS= $3.42; Stock= $30.40
e. Debt= 70%; Equity= 30%; EPS= $3.31; Stock= $30.00