If we ignore bankruptcy and agency costs then the optimal capital structure for a firm under the moderate view would be 100% debt.

Question

Quizplus · Accepted Answer

The moderate view suggests that there is an optimal capital structure that balances the benefits of debt (tax savings) with the costs of debt (bankruptcy and agency costs). If we ignore bankruptcy and agency costs, then the only benefit of debt is the tax savings. Therefore, the optimal capital structure would be 100% debt.

If We Ignore Bankruptcy and Agency Costs Then the Optimal