Question #90
Reading: Reading 21 Free Cash Flow Valuation
PDF File: Reading 21 Free Cash Flow Valuation.pdf
Page: 43
Status: Unattempted
Correct Answer: A
Question
Optimal capital structure is the mix of debt and equity that will maximize the value of the firm and minimize:
Answer Choices:
A. the firm's cost of capital
B. the amount of taxable profit reported
C. agency costs of equity
Explanation
The optimal capital structure is the mix of debt and equity that will maximize the value of
the firm and minimize weighted average cost of capital (i.e. the firm's cost of capital or
"WACC").