The optimal capital structure has been achieved when the: A) Debt-equity ratio is equal to 1. B) Weight of equity is equal to the weight of debt. C) Debt-equity ratio is such that the cost of debt exceeds the cost of equity. D) Cost of equity is maximized given a pre-tax cost of debt. E) Debt-equity ratio selected results in the lowest possible weighed average cost of capital. The static theory of capital structure states that firms borrow up to the point where the tax benefit of one additional dollar of debt is equal to the marginal cost of: A) Equity, B) Financial capital, C) Sales, D) Financial distress, E) Leverage. You decide to raise $8 million in additional funding via a rights offering. One right is being granted for every share of stock currently outstanding. The offering consists of a total of 400.000 new shares. Currently, there are 2.5 million shares outstanding at a market price of $31 per share. What is the value of one right? A) $1.52 B) $1.24 C) $1.37 D) $.71 E) $1.15 UNLEV has an expected perpetual EBIT = $4,000. The unlevered cost of capital = 15% and there are 20,000 shares of stock outstanding. The firm is considering issuing $8, 800 in new par bonds to add financial leverage to the firm. The proceeds of the debt issue will be used to repurchase equity. The cost of debt = 10% the tax rate = 34%. There are no flotation costs. What is the value of UNLEV after the restructuring? A) $ 15, 930 B) $20, 592 C) $22, 461 D) $17, 600 E) $18.519 WACC is the overall rate of return a firm must earn on its assets to maintain: A) The value of its stock. B) The book value of its assets. C) Its current credit rating. D) Its current cost of debt. E) Its current level of cash flows