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Capital Structure and Leverage

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Capital Structure and Leverage 6. Which of the following statements is most correct? a. Increasing financial leverage is one way to increase a firm’s revenues. b. Firms with lower fixed costs tend to have greater operating leverage. c. The debt ratio that maximizes EPS generally exceeds the debt ratio that maximizes share price. d. Statements a and b are correct. 7. As a rule, the optimal capital structure is found by determining the debt-equity mix that maximizes expected EPS. a. True b. False 8. The optimal capital structure simultaneously maximizes stock price and minimizes the WACC. a. True b. False 9. The firm’s beta coefficient if it has no debt is called its: a. unlevered beta. b. levered beta. c. risk-free beta d. stand-alone beta 10. From the information below, select the optimal capital structure for Minnow Entertainment Company. a. Debt = 40%; Equity = 60%; EPS = $2.95; Stock price = $26.50. b. Debt = 50%; Equity = 50%; EPS = $3.05; Stock price = $28.90. c. Debt = 60%; Equity = 40%; EPS = $3.18; Stock price = $31.20. d. Debt = 80%; Equity = 20%; EPS = $3.42; Stock price = $30.40. e. Debt = 70%; Equity = 30%; EPS = $3.31; Stock price = $30.00. Business Assignment Help, Business Homework help, Business Study Help, Business Course Help

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