Final answer:
WACC calculates the average rate of return needed to satisfy shareholders. Optimal capital structure is the ideal debt-equity mix. CAPM calculates expected return based on risk. Business risk is uncertainty due to competition, market conditions, and operational challenges, while financial risk is the risk of financial loss.
Step-by-step explanation:
WACC (Weighted Average Cost of Capital) is a financial metric that calculates the average rate of return that a company needs to earn on its investments in order to satisfy its shareholders. It takes into account the cost of debt and the cost of equity. Optimal capital structure refers to the ideal mix of debt and equity that a company should use to finance its operations. It aims to minimize the cost of capital and maximize the value of the company. The equilibrium pricing model (CAPM) is a financial model that calculates the expected return on an investment based on its systematic risk and the risk-free rate of return. Business risk refers to the uncertainty and potential losses that a company may face due to factors such as competition, market conditions, and operational challenges. On the other hand, financial risk refers to the risk of financial loss that a company may face due to its financial obligations, such as debt repayments.