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The _________ capital structure is the one that strikes the balance between ______ and ________ and thereby maximizes the firm's _______ _______. optimal; risk; return; stock price. A firm's ________ capital structure is generally set equal to the estimated optimal structure. target.
Study with Quizlet and memorize flashcards containing terms like What is the optimal capital structure?***, The capital structure that maxmizes the stock prices is***, An increase in the percent of the firm that is financed with debt, wd, and more.
Study with Quizlet and memorize flashcards containing terms like maximizes, greater, financial leverage and more.
The optimal capital structure is the target. Recall that the market values of a company’s debt and equity are used to determine the costs of capital and the weights in the capital structure. Because market values change daily due to economic conditions, slight variations will occur in the calculations from one day to the next.
Explain how the possibility of financial distress impacts the cost of capital. Discuss the trade-offs a firm faces as it increases its leverage. Explain the concept of an optimal capital structure.
Distinguish between the two major sources of capital appearing on a balance sheet. Explain why there is a cost of capital. Calculate the weights in a company’s capital structure. The Basic Balance Sheet. In order to produce and sell its products or services, a company needs assets.
8 sie 2024 · An optimal capital structure is the best mix of debt and equity financing that maximizes a company’s market value while minimizing its cost of capital.
