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
E)equates; (blank)

Question

Quizplus · Accepted Answer

The optimal capital structure maximizes the value of the firm by maximizing the marketed claims (like debt and equity) and minimizing the nonmarketed claims (like taxes and bankruptcy costs) against the firm's cash flows.

The Optimal Capital Structure of a Firm _____ the Marketed