The combination of debt and equity that maximizes a firm's value is known as the:
A) degree of financial leverage (DFL).
B) maximum weighted average cost of capital (WACC).
C) maximum business risk.
D) optimal capital structure.
E) indifference point.

Question

Quizplus · Accepted Answer

The optimal capital structure is the combination of debt and equity that maximizes a firm's value. It is determined by considering various factors such as the cost of debt and equity, tax implications, and risk associated with each option. The other options listed in the question are either not directly related to the optimal capital structure or are not the correct terminology for this concept.

The Combination of Debt and Equity That Maximizes a Firm's