A firm should select the capital structure which:
A) Produces the highest cost of capital.
B) Maximizes the value of the firm.
C) Minimizes taxes.
D) Is fully unlevered.
E) Has no debt.

Question

Quizplus · Accepted Answer

Maximizing the value of the firm is the primary goal of financial management, and selecting the optimal capital structure is a key strategy to achieve this. The optimal capital structure balances debt and equity to minimize the cost of capital and maximize firm value.

A Firm Should Select the Capital Structure Which