Question

The optimum capital structure Question 4 options: a) Provides the lowest cost of capital b) Has the best mix of debt, preferred stock, and common equity c) Can change over time as market and firm conditions change d) All of these apply

Answer 1

d) All of these apply.

Step-by-step explanation:

An optimum capital structure can be defined as a financial instrument used by firms to determine the best mix of debt and equity financing that maximizes its market value, as well as minimizes its cost of capital such as operations and expansion. It minimizes the weighted average cost of capital (WACC) of a firm to the least most possible value.

Generally, the optimum capital structure used by a firm to maximize its market value;

a) Provides the lowest cost of capital.

b) Has the best mix of debt, preferred stock, and common equity.

c) Can change over time as market and firm conditions change.