The target capital structure of a firm is the capital structure that
A)minimizes the operating risk of the firm's assets.
B)maximizes the tax shield created by debt.
C)minimizes the default risk of long-term debt.
D)maximizes the price of the firm's stock.
E)none of the above.

Question

Quizplus · Accepted Answer

The target capital structure is designed to maximize the firm's stock price by balancing the benefits and costs of debt and equity financing.

The Target Capital Structure of a Firm Is the Capital