hard · Principles of Finance

If a firm's WACC is minimized at a Debt-to-Value (D/V) ratio of 40%, what can be inferred about the firm's Enterprise Value at this specific point?

1. The Enterprise Value is at its lowest because the firm has taken on significant financial risk.
2. The Enterprise Value is maximized because the discount rate for its cash flows is at its lowest possible level.
3. The Enterprise Value is independent of the WACC according to Modigliani-Miller Proposition I.
4. The Enterprise Value is equal to the book value of the firm's assets.

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