The capital structure decision attempts to minimize ____, which maximizes the value of the firm.
A) leverage costs
B) the cost of capital
C) labor costs
D) compensation packages

Question

Quizplus · Accepted Answer

The capital structure decision aims to minimize the cost of capital, which is the weighted average cost of debt and equity that a company incurs in order to finance its operations. By minimizing the cost of capital, a company can maximize the value of the firm for its shareholders. Leverage costs, labor costs, and compensation packages are all important considerations for a company, but they are not the primary concern in the capital structure decision.

The Capital Structure Decision Attempts to Minimize ____, Which Maximizes