The optimal capital structure is the one that balances ________.
A) return and risk factors in order to maximize profits
B) return and risk factors in order to maximize earnings per share
C) return and risk factors in order to maximize market value
D) return and risk factors in order to maximize dividends

Question

Quizplus · Accepted Answer

The optimal capital structure should aim to balance the return and risk factors in order to maximize the market value of the firm. This means finding the right mix of debt and equity financing that maximizes shareholder wealth. Maximizing profits, earnings per share, or dividends may not necessarily lead to maximizing market value.

The Optimal Capital Structure Is the One That Balances ________