The optimal capital structure of a company:
A) minimizes the company's tax payments.
B) maximizes the value of that company's marketed claims.
C) minimizes both the marketed and nonmarketed claims against that company.
D) eliminates all nonmarketed claims against that company.
E) equates the company's marketed and nonmarketed claims.

Question

Quizplus · Accepted Answer

The optimal capital structure of a company is the one that maximizes the value of the company's marketed claims, which include securities such as stocks and bonds. By doing this, the company can maximize its shareholder value and minimize the cost of capital. Minimizing tax payments or nonmarketed claims may not necessarily result in the optimal capital structure.

The Optimal Capital Structure of a Company