CHAP 12 - Q4

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Transworld Consortium Corp. is trying to identify its optimal capital structure. Transworld Consortium Corp. has gathered the following financial information to help with the analysis. Debt Ratio (% ) Equity Ratio (%) EPS ($) DPS ($) Stock Price ($) 1.25 0.55 30 70 36.25 40 60 1,40 0.60 37.75 50 50 1.60 0.65 39.50 40 60 1.85 0.75 38.75 70 30 38.25 1.75 0.70 Which capital structure shown in the preceding table is Transworld Consortium Corp.'s optimal capital structure? Debt ratio 30% ; equity ratio 70 % O Debt ratio 70%; equity ratio 30 % O Debt ratio 60 % ; equity ratio 40 % Debt ratio = 40%; equity ratio 60% ODebt ratio 50% ; equity ratio 50 % Which of the following statements regarding a firm's optimal capital structure are true? Check all that apply. The optimal capital structure minimizes the firm's cost of debt The optimal capital structure minimizes the firm's cost of equity. The optimal capital structure maximizes the firm's EPS The optimal capital structure maximizes the firm's stock price. The optimal capital structure minimizes the firm's WACC