A Firm's Optimal Capital Structure

Multiple Choice

A firm's optimal capital structure:

A) is the debt-equity ratio that results in the lowest possible weighted average cost of capital
B) exists when the debt-equity ratio is 0.50
C) is found by locating the mix of debt and equity which causes the earnings per share to equal exactly $1
D) is the debt-equity ratio that exists at the point where the firm's weighted after-tax cost of debt is minimised
E) is generally a mix of 40 per cent debt and 60 per cent equity