The optimal capital structure of a company:
A) minimises the cost of financing a company's projects.
B) minimises interest payments to creditors.
C) maximises company value.
D) both a and c.

Question

Quizplus · Accepted Answer

The optimal capital structure of a company should aim to minimize the cost of financing a company's projects while also maximizing company value. This is achieved by balancing the use of debt and equity financing to achieve an appropriate mix of risk and return for the company. Since options A and C are both desirable goals for a company's capital structure, the best choice is D, which encompasses both options A and C. Minimizing interest payments to creditors may be desirable, but it should not be the only focus of a company's capital structure.

The Optimal Capital Structure of a Company