Firm optimal capital structure is the one which

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Reference no: EM132055492

1. Your company's CFO has asked you for help with the WACC. The comapny just paud a dividend , D0 of $3.20, which is expected to grow at a constant rate of 4.6% a year indefiently. The company would pay 4% in flotation costs if it issued a new common stock. The current price of the stock is $26.50. What is the cost of equity from retained earning using the DCF approach?

A. 17.23%

B. 17.18%

C. 12.28%

D. 17.76%

2. A firm's optimal capital structure is the one which

results in the lowest possible borrowing costs

maximizes its EPS (earnings per share

maximizes its ROA (return on assets)

minimizes its minimizes its WACC (weighted average cost of capital)

Reference no: EM132055492

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