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Homework answers / question archive / From the information below, select the optimal capital structure for Mountain High Corp

From the information below, select the optimal capital structure for Mountain High Corp

Accounting

From the information below, select the optimal capital structure for Mountain High Corp. 26) A) Debt = 70%; Equity = 30%; EPS = $3.31; Stock price = $30.00 B) Debt = 60%; Equity = 40%; EPS = $3.18; Stock price = $31.20 C) Debt = 80%; Equity = 20%; EPS = $3.42; Stock price = $30.40 D) Debt = 50%; Equity = 50%; EPS = $3.05; Stock price = $28.90 E) Debt = 40%; Equity = 60%; EPS = $2.95; Stock price = $26.50 
 

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Answer

B )

Explanation

An optimal capital structure is the one that maximizes stock price. So, the correct option should be B "Debt 60%; Equity 40%; EPS = $3.18; Stock price = $31.20". As it has the highest stock price.