In determining the optimum capital structure, it is assumed that the firm will raise capital in the optimum proportions every year.
The firm must constantly reevaluate its capital structure for changes, in order to allow them to change its approach in the next round of financing.

Question

Quizplus · Accepted Answer

The first statement is true, but the second statement is false. The firm should constantly monitor and reevaluate its capital structure, but it may not necessarily raise capital every year or in the same proportions. Factors such as market conditions, business opportunities, and changes in the cost of capital may influence the firm's financing decisions.

In Determining the Optimum Capital Structure, It Is Assumed That