A firm\'s optimal capital structure ______ is generally a mix of 40% debt and 60

Question

A firm's optimal capital structure ______

is generally a mix of 40% debt and 60% equity.

exists when the debt-equity ratio is 0.5.

is the debt-equity ratio that exists at the point where the firm's weighted after-tax cost of debt is minimized.

is the debt-equity ratio that results in the lowest possible weighted average cost of capital and the largest firm value.

is generally a mix of 40% debt and 60% equity.

exists when the debt-equity ratio is 0.5.

is the debt-equity ratio that exists at the point where the firm's weighted after-tax cost of debt is minimized.

is the debt-equity ratio that results in the lowest possible weighted average cost of capital and the largest firm value.

Explanation / Answer

A firms optimal capital structure is the debt equity ratio that results in the lowest possible weighted average cost of capital and the largest firm value because every firm want the cost of financing the business to be minimum nad want the value of the business to be maximised

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