The controversy over the existence of an optimal capital structure is debated between those ________ who believe a traditional approach exists and those ________, who do not believe one exists. In the ________ approach to capital structure, the optimal capital structure occurs where the ________ is minimized.
A) supporters of Modigliani and Miller; traditionalists; Modigliani and Miller; degree of financial leverage
B) traditionalists; supporters of Modigliani and Miller; traditional; cost of capital
C) supporters of Modigliani and Miller; traditionalists; Modigliani and Miller; cost of capital
D) traditionalists; supporters of Modigliani and Miller; traditional; degree of financial leverage

Question

Quizplus · Accepted Answer

Traditionalists believe in an optimal capital structure, while supporters of Modigliani and Miller do not. In the traditional approach, the optimal capital structure is where the cost of capital is minimized.

The Controversy Over the Existence of an Optimal Capital Structure