The optimal capital structure of a firm _____ the marketed claims and _____ the nonmarketed claims against the cash flows of the firm.
A) minimizes; minimizes
B) minimizes; maximizes
C) maximizes; minimizes
D) maximizes; maximizes

Question

Quizplus · Accepted Answer

The optimal capital structure maximizes the value of marketed claims (like debt and equity) by minimizing the cost of capital, while minimizing nonmarketed claims (like taxes and bankruptcy costs) to enhance firm value.

The Optimal Capital Structure of a Firm _____ the Marketed