When choosing a capital structure, the objective of the firm should be to a) cho

Question

When choosing a capital structure, the objective of the firm should be to

a) choose the one that maximizes the firm's WACC

b) choose the one that results in the greatest possible interest tax shield

c) choose any capital structure since capital structure is always irrelevant

d) choose the one that maximizes the current value of the stock

a) choose the one that maximizes the firm's WACC

b) choose the one that results in the greatest possible interest tax shield

c) choose any capital structure since capital structure is always irrelevant

d) choose the one that maximizes the current value of the stock

Explanation / Answer

When choosing a capital structure, the objective of the firm should be to choose one that minimizes the firms WACC and maximizes the wealth of the shareholders by maximizing value of the firm.

Correct Answer D

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