In the MM model, the mix of debt and equity that minimizes the cost of capital is the:
A)optimal corporate structure.
B)target financial structure.
C)optimal capital structure.
D)optimal degree of combined leverage.

Question

Quizplus · Accepted Answer

The MM model suggests that the optimal capital structure is the mix of debt and equity that minimizes the cost of capital. This involves finding the point where the cost of equity and the cost of debt intersect to produce the lowest overall cost of capital. Therefore, the optimal capital structure is the answer.

In the MM Model, the Mix of Debt and Equity