The target capital structure is the debt-equity mix that:

Question

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The target capital structure is the mix of debt and equity that maximizes the value of the firm. This is because the optimal capital structure will result in the lowest overall cost of capital, which in turn will maximize the value of the firm. Maximized cost of capital (A) is not the goal, nor is minimized cost of debt financing (D) or minimized overall debt level of a firm (E). Minimizing the cost of equity financing (C) is also not the primary goal, as the target capital structure focuses on maximizing firm value rather than minimizing a specific cost component.

The Target Capital Structure Is the Debt-Equity Mix That