107 725
Assignments Done
96.6%
Successfully Done
In April 2024
In April 2024
Your physics assignments can be a real challenge, and the due date can be really close — feel free to use our assistance and get the desired result.
Physics
Be sure that math assignments completed by our experts will be error-free and done according to your instructions specified in the submitted order form.
Math
Our experts will gladly share their knowledge and help you with programming projects. Keep up with the world’s newest programming trends.
Programming
Answer to Question #6762 in Economics of Enterprise for LaMarcus Streeter
Question #6762
2. Which of the following statements is CORRECT?
a. A firm can use retained earnings without paying a flotation cost. Therefore, while the cost of retained earnings is not zero, its cost is generally lower than the after-tax cost of debt.
b. The capital structure that minimizes a firm’s weighted average cost of capital is also the capital structure that maximizes its stock price.
c. The capital structure that minimizes the firm’s weighted average cost of capital is also the capital structure that maximizes its earnings per share.
d. If a firm finds that the cost of debt is less than the cost of equity, increasing its debt ratio must reduce its WACC.
e. Other things held constant, if corporate tax rates declined, then the Modigliani-Miller tax-adjusted tradeoff theory would suggest that firms should increase their use of debt.
a. A firm can use retained earnings without paying a flotation cost. Therefore, while the cost of retained earnings is not zero, its cost is generally lower than the after-tax cost of debt.
b. The capital structure that minimizes a firm’s weighted average cost of capital is also the capital structure that maximizes its stock price.
c. The capital structure that minimizes the firm’s weighted average cost of capital is also the capital structure that maximizes its earnings per share.
d. If a firm finds that the cost of debt is less than the cost of equity, increasing its debt ratio must reduce its WACC.
e. Other things held constant, if corporate tax rates declined, then the Modigliani-Miller tax-adjusted tradeoff theory would suggest that firms should increase their use of debt.
Expert's answer
Statement B is CORRECT. The firm’s optimal capital structure is simply defined as the mix of debt, preferred stock and common equity that will optimize the company's stock price. As a company raises new capital it will
focus on maintaining this optimal capital structure. Thus, the capital structure will optimize the company's stock price and minimize the
company's weighted-average cost of capital (WACC). Both methods yield the same
results.
focus on maintaining this optimal capital structure. Thus, the capital structure will optimize the company's stock price and minimize the
company's weighted-average cost of capital (WACC). Both methods yield the same
results.
Learn more about our help with Assignments: Economics of Enterprise
Finding a professional expert in "partial differential equations" in the advanced level is difficult.
You can find this expert in "Assignmentexpert.com" with confidence.
Exceptional experts! I appreciate your help. God bless you!
#340153 on Dec 2023
#340153 on Dec 2023
Comments
Leave a comment