Which of the following statements is true of the optimal capital structure?
A. It is found by determining the debt-equity mix that maximizes expected EPS.
B. It simultaneously maximizes EPS and minimizes the WACC.
C. It minimizes the cost of equity, which is a necessary condition for maximizing the stock price.
D. It simultaneously minimizes the cost of debt, the cost of equity, and the WACC.
E. It should have the combination of debt and equity that will maximize the price of the firm's stock.
Answer: E
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