The fact that some managers are more aggressive in their use of debt financing in attempting to boost profits does not influence the optimal or value-maximizing capital structure.

Question

Quizplus · Accepted Answer

The optimal capital structure is determined by a firm's fundamentals such as its assets, income, and growth prospects, and is not influenced by the manager's preferences for debt financing. Therefore, the level of aggressiveness in debt financing does not affect the value-maximizing capital structure.

The Fact That Some Managers Are More Aggressive in Their