10 Optimal capital structure, or debt capacity, is the debt-equity mix that: A) maximizes shareholder control. B) puts the firm at the EBIT-EPS breakeven point. C) maximizes the value of the firm's common equity. D) minimizes the amount of debt held by the firm. 17) In a recent comprehensive survey, corporate CFOs were a sked why they did NOT use more equity in their capital structure. Which of the following choices was NOT cited by 50% or more of the CFOs responding to the survey? A) Concerns that share price might decline B) EPS dilution C) Concerns that equity was not the least expensive form of financing D) All of the above were cited by at least 50% of the responding CFOs. 18) Creative Industries Inc. is looking to finance a new project with either debt or equity. The firm anticipates that its breakeven EPS-EBIT point is when EBIT reaches $3,000,000. If the projected EBIT are $3,500,000 for the foreseeable future, then to maximize EPS the firm should issue: A) a dual class of equity. C) preferred shares. B) equity. D) debt 19) Which of the following statements is NOT true? A) Valuing stock by using a P/E multiple at least attempts to reflect the uncertainty associated B) Valuing stock by using a P/E multiple at least attempts to reflect the anticipated growth in C) Valuing stock by using a P/E multiple is an easy and intuitive methodology for an initial D) All of the above are true. with the earnings. earnings valuation technique