CFA Practice Question

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CFA Practice Question

A firm's objective should be to choose a capital structure that ______.

A. results in the largest interest tax shield
B. minimizes the firm's WACC
C. maximizes the current value of the firm's bonds
D. minimizes the value of the firm
E. A firm can choose any capital structure, since capital structure is always irrelevant.
Correct Answer: B

User Contributed Comments 5

User Comment
rockeR Wow this is tricky
setmefree min WACC = max firm value, always true
johntan1979 Why would any sane person want to minimize the value of the firm?
gill15 Johntan.

It's very simple why a person would want to minimize the value of the firm. It's because the person is writing CFA level I.
Inaganti6 @johntan, and for that very reason, that answer isn't the right answer
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