- CFA Exams
- CFA Exam: Level I 2021
- Study Session 10. Corporate Finance (1)
- Reading 33. Cost of Capital
- Subject 1. Cost of Capital
CFA Practice Question
A firm's objective should be to choose a capital structure that ______.
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.
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 6
| User | Comment |
|---|---|
| rockeR | Wow this is tricky |
| setmefree | min WACC = max firm value, always true |
| DonAnd | I narrowed it down to B or E and it definitely won't be E so voila B it is. :-) |
| 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 |