When a firm is operating with the optimal capital structure, the weighted average cost of capital will be at its minimal point.

Question

Quizplus · Accepted Answer

The optimal capital structure is the mix of debt, preferred stock, and common equity that minimizes a firm's weighted average cost of capital (WACC) and maximizes its value. When a firm achieves this balance, it is operating at the point where its cost of capital is at its lowest.

When a Firm Is Operating with the Optimal Capital Structure