The firm's optimal capital structure is the mix of financing sources that

Question

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The firm's optimal capital structure should aim to maximize the total value of the firm's debt and equity. This means finding the right mix of financing sources that balance the benefits of debt (tax shields, lower cost of capital) with the costs of debt (financial distress, bankruptcy risk). By maximizing the total value of the firm, the capital structure can ultimately lead to higher stock prices and greater shareholder value.

The Firm's Optimal Capital Structure Is the Mix of Financing