Chapter 12 Assignment 4. Determining the optimal capital structure Review the following situation: Universal Exports Inc. is trying to identify its optimal capital structure. Universal Exports Inc. has gathered the following financial information to help with the analysis EPS DPS Debt Ratio (%) 30 Equity Ratio (%) 70 Stock Price 22.35 1.55 0.34 40 60 1.67 0.45 24.56 50 50 0.51 25.78 60 40 1.72 1.78 1.84 0.57 27.75 70 30 0.62 26.42 Which capital structure shown in the preceding table is Universal Exports Inc.'s optimal capital structure? O Debt ratio -50%; equity ratio -50% O Debt ratio = 30%; equity ratio -70% O Debt ratio 40%, equity ratio -60% O Debt ratio 60%; equity ratio 40% O Debt ratio -70%; equity ratio -30% Which of the following statements regarding a firm's optimal capital structure are true? Check all that apply. The optimal capital structure maximizes the firm's stock price. RE 40 60 1.67 0.45 24.56 50 50 1.72 0.51 25.78 60 40 1.78 0.57 27.75 70 30 1.84 0.62 26.42 Which capital structure shown in the preceding table is Universal Exports Inc.'s optimal capital structure? O Debt ratio = 50%; equity ratio -50% O Debt ratio -30%; equity ratio = 70% O Debt ratio -40%; equity ratio = 60% O Debt ratio = 60%; equity ratio 40% O Debt ratio = 70%; equity ratio -30% Which of the following statements regarding a firm's optimal capital structure are true? Check all that apply. The optimal capital structure maximizes the firm's stock price. The optimal capital structure minimizes the firm's WACC. The optimal capital structure minimizes the firm's cost of equity, The optimal capital structure maximizes the firm's EPS. The optimal capital structure minimizes the firm's cost of debt. Grade it Now Save & Continue