1. Which of the following statements is CORRECT?
a. The optimal capital structure minimizes the cost of equity, which is a necessary condition for maximizing the stock price.
b. As a rule, the optimal capital structure is found by determining the debt-equity mix that maximizes expected EPS.
c. The optimal capital structure simultaneously minimizes the cost of debt, the cost of equity, and the WACC.
d. The optimal capital structure simultaneously maximizes the stock price and minimizes the WACC.
e. The optimal capital structure simultaneously maximizes EPS and minimizes the WACC.
2. Which of the following statements concerning the cash budget is CORRECT?
a. Cash budgets do not include financial items such as interest and dividend payments.
b. Depreciation expense is not explicitly included, but depreciation's effects are reflected in the estimated tax payments.
c. Capital budgeting decisions have no effect on the cash budget until projects go into operation and start producing revenues.
d. Cash budgets do not include cash inflows from long-term sources such as the issuance of bonds.
e. Changes that affect the DSO do not affect the cash budget.