The firm's optimum debt/equity mix minimizes the firm's cost of capital, which in turn will help the firm to maximize shareholder wealth.

Question

Quizplus · Accepted Answer

This statement is true because finding the optimal debt/equity mix can help the firm achieve the lowest possible cost of capital, which will increase the value of the firm and benefit shareholders. However, it is important to note that too much debt can also increase financial risk and potentially harm shareholder wealth, so finding the optimal mix is crucial.

The Firm's Optimum Debt/equity Mix Minimizes the Firm's Cost of Capital