Optimal capital structure,or debt capacity,is the debt-equity mix that:
A)puts the firm at the EBIT-EPS breakeven point.
B)maximizes shareholder control.
C)minimizes the amount of debt held by the firm.
D)maximizes the value of the firm's common equity.

Question

Quizplus · Accepted Answer

The optimal capital structure is the one that maximizes the value of the firm's common equity. This means finding the right balance between debt and equity financing, taking into account factors such as tax benefits, cost of capital, and financial risk. By maximizing the value of the firm's common equity, shareholders benefit through increased share prices and dividends.

Optimal Capital Structure,or Debt Capacity,is the Debt-Equity Mix That