QUESTION 7 The firm's target capital structure should do which of the following? a Maximize the earnings per share (EPS). Ob Minimize the cost of debt (v.) Oc Obtain the highest possible bond rating. Od. Minimize the cost of equity (r.). O e Minimize the weighted average cost of capital (WACC) QUESTIONS Calvin Coolidge Factory Inc. is currently 100% equity financed. The CFO is considering a recapitalization plan under which the firm would inue long-term debt with an after-tax yield of 9% and use the proceeds to repurchase some of its common stock The recapitalization would not change the company's total investor-supplied capital, the size of the firm (1.e., total assets), and it would not affect the firm's return on investors' capital (ROIC), which is 15%. The CFO believes that this recapitalization would reduce the firm's WACC and increase its stock price. Which of the following would be likely to occur if the company goes ahead with the recapitalization plan? O a. The company's net income would increase b. The company's earnings per share would decline Os. The company's cost of equity would increase Od The company's ROA would increase Ole The company's ROE would decline