1. Capital structure decisions and firm value Why focus on the optimal capital structure? Capital structure decisions involve the ways a firm's assets are financed and are often presented as a percentage of the type of financing used, such as debt, preferred stock, and common equity. As with all financial decisions, the firm should try to set a capital structure that maximizes the stock price, or shareholder value. This is called the optimal capital structure. Which of the following statements regarding a firm's optimal capital structure is true? O The optimal capital structure maximizes the firm's cost of equity. O The optimal capital structure maximizes the firm's cost of debt. O The optimal capital structure maximizes the firm's earnings per share (EPS). The optimal capital structure minimizes the firm's weighted average cost of capital (WACC). Understanding the impact of debt in the capital structure Suppose you are conducting a workshop on capital structure decisions and you want to highlight certain key issues related to capital structure. Your assistant has made a list of points for your session, but he thinks he might have made some mistakes Review the list and identify which items are correct. Check all that apply