A firm should select the capital structure which:
A)maximizes the value of the firm.
B)has no debt.
C)is fully levered.
D)minimizes taxes.
E)produces the highest cost of capital.

Question

Quizplus · Accepted Answer

The primary goal of a firm should be to maximize the value of the firm, and the capital structure plays a critical role in this process. A firm should choose the capital structure that maximizes the value of the firm, taking into account various factors such as cost of capital, risk, and tax considerations. This may involve using debt financing to take advantage of tax shields or finding a balance between debt and equity to minimize the cost of capital. Ultimately, the choice of capital structure depends on the unique characteristics and goals of the firm.

A Firm Should Select the Capital Structure Which