CHOOSE THE CORRECT ANSWER

1. The ________ is the firm's desired optimal mix of debt and equity financing. A) book value B) market value C) cost of capital D) target capital structure

2. In order to recognize the interrelationship between financing and investments, a firm should use ________ when evaluating an investment. A) the least costly source of financing B) the most costly source of financing C) the weighted average cost of all financing sources D) the current opportunity cost

3. The basic motive for capital expenditure is to ________. A) expand operations B) replace current assets C) renew current assets D) improve leverage