In general, a firm's theoretical optimal capital structure is that which balances the tax benefits of debt financing against the increase probability of bankruptcy that result from its use.

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This statement is true. A firm's optimal capital structure involves finding the right balance between the benefits of debt financing, such as tax deductibility of interest payments, and the costs of debt, such as increased probability of bankruptcy. This balance is important for maximizing the value of the firm and its ability to generate profits for shareholders.

In General, a Firm's Theoretical Optimal Capital Structure Is That