Question

The optimal capital structure has been achieved when the A. weight of equity is equal to the weight of debt. B. debt-equity ratio selected results in the lowest possible weighted average cost of capital. C. firm is totally financed with debt. D. debt-equity ratio is such that the cost of debt exceeds the cost of equity. E. cost of equity is maximized. Reset Selection

Answer 1

Answer:

debt-equity ratio results in the lowest possible weighted average cost of capital.

Explanation:

The debt equity ratio measures how well a business's equity can account for its debt.

Weighted average cost of capital is referred to as a business's cost of capital and is the rate a company is expected to pay to its shareholders.

When the debt equity ratio results in the lowest weighted average cost of capital, it indicates that the cost of finding for the company is low. This is the optimal and least expensive capital structure.