With which of the followingis a firm's target capital structure consistent?
A) Maximum earnings per share
B) Minimum cost of debt (rd)
C) Minimum risk
D) Minimum cost of equity (rs)
E) Minimum weighted average cost of capital

Question

Quizplus · Accepted Answer

A firm's target capital structure is typically the mix of debt and equity that balances the cost of capital and risk. The goal is to minimize the weighted average cost of capital (WACC), which is a weighted average of the cost of debt and equity. All other options prioritize one specific element (earnings per share, cost of debt, etc.) over achieving an efficient capital structure.

With Which of the Followingis a Firm's Target Capital Structure