Question: 1)The reason why maximizing share value and maximizing EPS do not give the same optimal capital structure is because A) EPS maximization does not consider

1)The reason why maximizing share value and maximizing EPS do not give the same optimal capital structure is because

A) EPS maximization does not consider risk. B) share value maximization does not consider risk. C) EPS maximization considers cash flows. D) EPS maximization does consider risk.

2) A firm has an operating profit of $300,000, interest of $35,000, and a tax rate of 40 percent. The firm has an after-tax cost of debt of 5 percent and a cost of equity of 15 percent. The firm's target capital structure is set at a mix of 40 percent debt and 60 percent equity. According to the traditional approach to capital structure, the value of the firm is

A) $1.4 million. B) $2.0 million. C) $2.7 million. D) $6.0 million.

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