The optimal capital structure:
A) Will be the same for all firms in the same industry.
B) Will remain constant over time unless the firm does an acquisition.
C) Of a firm will vary over time as taxes and market conditions change.
D) Places more emphasis on the operations of a firm rather than the financing of a firm.
E) Is unaffected by changes in the financial markets.

Question

Quizplus · Accepted Answer

The optimal capital structure of a firm varies over time due to changes in taxes, market conditions, and other external factors, affecting the balance between debt and equity financing to minimize the cost of capital and maximize the firm's value.

The Optimal Capital Structure