An optimal capital structure minimizes a firm's cost of capital.

Question

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An optimal capital structure is a mix of debt and equity that minimizes a firm's cost of capital. This means that the firm should try to find the ideal balance between debt and equity financing that will result in the lowest possible cost of capital for the company. By finding this optimal mix, the firm can maximize its value for shareholders and be better positioned to achieve its long-term goals.

An Optimal Capital Structure Minimizes a Firm's Cost of Capital