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Which of the following statements is CORRECT?
a. A firm's business risk is solely determined by the financial characteristics of its industry.
b. The factors that affect a firm's business risk are determined partly by industry characteristics and partly by economic conditions. Unfortunately, these and other factors that affect a firm's business risk are not subject to any degree of managerial control.
c. One of the benefits to a firm of being at or near its target capital structure is that it eliminates any bankruptcy risk.
d. The firm's financial risk may have both market risk and diversifiable risk components.
e. The amount of debt in its capital structure does not affect a company's business risk.
Which of the following statements is CORRECT?
a. As a rule, the optimal capital structure is found by determining the debt-equity mix that maximizes expected EPS.
b. The optimal capital structure simultaneously maximizes EPS and minimizes the WACC.
c. The optimal capital structure minimizes the cost of equity, which is a necessary condition for maximizing the stock price.
d. The optimal capital structure simultaneously minimizes the cost of debt, the cost of equity, and the WACC.
e. The optimal capital structure simultaneously maximizes stock price and minimizes the WACC.
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The solution answer multiple choice business finance questions.
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The correct statements are as follows....
1 - b. The factors that affect a firm's business risk are ...
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