Which of the following is accepted wisdom regarding the optimal capital structure?
A)For most firms, the optimal capital structure is somewhere between 30% and 50% debt.
B)A firm with good profit prospects and little to no debt is probably missing an opportunity by not using borrowed money if interest rates are reasonable.
C)Debt levels above 60% create excessive risk and should be avoided.
D)All of the above

Question

Quizplus · Accepted Answer

All of the above options are accepted wisdom regarding the optimal capital structure. Option A suggests that the optimal capital structure for most firms falls between 30% and 50% debt. Option B suggests that a firm with good profit prospects and little to no debt is probably missing an opportunity by not using borrowed money if interest rates are reasonable. Finally, option C suggests that debt levels above 60% create excessive risk and should be avoided.

Which of the Following Is Accepted Wisdom Regarding the Optimal