PLEASE ANSWER THIS COMPLETELY : ( I WILL SURELY RATE YOU, THANK YOU!

In his private office, just down the hall from his conference room, the Chief Financial Officer (CFO) of Caberto Chemicals is meeting with his newly hired assistant, Chris.

CFO	Before our next meeting with the bankers, lets take a second and make sure that we have a common understanding about the companys capital structure. Caberto can potentially have three different capital structures: its current, actual capital structure, a target capital structure, and an optimal capital structure. If we wanted to talk about the observed capital structure at which Caberto actually exhibits today or any other specific point in time, wed be talking about which capital structure, Kayla?
Kayla	Wed be talking about Cabertos 1.) ___________ capital structure. This is the capital structure that Caberto is currently exhibiting, and it can differ from its ideal capital structure.
CFO	Very good. Now, if Cabertos current capital structure consists of 44.5% debt and 55.5% common equity, then, Kayla, how would we know if we are operating with our optimal capital structure?
Kayla	An optimal capital structure is characterized by two important attributes: First, it minimizes the firms 2.) _____________ , and second, it maximizes 3.) _____________ , which should make our shareholders very happy.
CFO	Again, thats great! Now, tell me, in general and without talking about Caberto in particular, why would a company ever be willing to operate with a capital structure that is not equal to its desired or target capital structure?
Kayla	Well, sir, there are several reasons that I can think of. Lets see. First, a firm may use debt and equity financing that differs from its targeted amounts if its business activities or its industry becomes 4.) ______________ risky or 5.) ______________ competitive, and, in general, these changes will allow a firm to increase its reliance on debt financing, everything else remaining constant. Second, the availability of 6.) ____________________ may prompt a company to borrow or issue new shares and thereby deviate from its target capital structure.
CFO	Kayla, youve passed my first test with flying colors! With this understanding of the theory and some real-world experience, youll be earning your bonus in no time.

CHOICES:

1.)

a. optimal

b. target

c. actual

2.)

a. weighted average cost of capital

b. shareholder wealth

3.)

a. the value of the firm

b. the firm's weighted average cost of capital

4.)

a. more

b. less

5.)

a. less

b. more

6.)

a. unusually inexpensive sources of capital

b. unusually expensive sources of capital