Optimal capital structure is
A) the mix of permanent sources of funds used by the firm in a manner that will maximize the company's common stock price.
B) the mix of all items that appear on the right-hand side of the company's balance sheet.
C) the mix of funds that will minimize the firm's cost of equity capital.
D) the mix of funds that will maximize the firm's interest tax shield.

Question

Quizplus · Accepted Answer

Optimal capital structure refers to the combination of debt and equity that will maximize the company's common stock price. It aims to strike the right balance between the cost of debt and the cost of equity, minimizing the overall cost of capital while maximizing shareholder returns.

Optimal Capital Structure Is