The optimal capital structure of a firm ________ the marketed claims and ________ the nonmarketed claims against the cash flows of the firm.
A)minimizes;minimizes
B)maximizes;maximizes
C)minimizes;maximizes
D)maximizes;minimizes

Question

Quizplus · Accepted Answer

The optimal capital structure of a firm maximizes the value of the marketed claims (such as stocks and bonds that can be traded in financial markets) and minimizes the value of the nonmarketed claims (such as claims by government, employees, and other stakeholders that cannot be easily traded or sold). This balance helps in achieving the lowest cost of capital and maximizing the firm's value.

The Optimal Capital Structure of a Firm ________ the Marketed