What is its optimal capital structure link with cost of capital?
Answers
Answered by
11
The optimal capital structure is a kind of a financial measurement which is used by firms in order to determine the best combination of debt and equity financing which can be used for the firm operations and expansions.
This optimal capital structure helps in lowering the cost of capital so that the firm is not completely dependent on external creditors. They will be able to finance their core operations.
According to the traditional school postulates, at the optimum capital structure, a value at which the firm's value is the highest will have the cost of capital at its lowest.
This optimal capital structure helps in lowering the cost of capital so that the firm is not completely dependent on external creditors. They will be able to finance their core operations.
According to the traditional school postulates, at the optimum capital structure, a value at which the firm's value is the highest will have the cost of capital at its lowest.
Similar questions