Answer:
B. <u>the weighted average cost of capital is minimized </u>
Explanation:
As per the traditional capital structure theory, as a firm employs more and more debt in it's capital structure, the financial leverage increases and since debt being a cheaper source of finance than equity with interest paid on debt being a tax deductible expense, the overall cost of capital initially falls.
As the firm further keeps increasing the proportion of debt, such debt raises the expectations of equity stockholders which raises the cost of equity and thus the overall cost of capital begins to rise.
An optimal capital structure under the theory refers to the one at which, overall cost of capital or the weighted average cost of capital of the firm is the lowest and value of the firm is the highest.
Answer
The answer and procedures of the exercise are attached in the following archives.
Step-by-step explanation:
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
Answer:
According to the data provided the opportunity costs is detailed below:
Initial Balance $20,000
Monthly interst $200
Investment $500
________________________
The Opportunity cost is $500
Explanation:
The opportunity cost is the price you pay for not choosing best second alternative when you make a decision. In this case the person has three options:
1. Spending the money
2. Save the money
3. Invest the money
Once the money is spent the opportunity costs is generated and it is measured by the interest rate lost for not keeping the money in the investment that will generate an interest rate of $500 monthly.
The opportunity cost of the third bicycle is 20 tents.
What is opportunity cost?
The value or advantage forfeited by engaging in a specific activity in comparison to engaging in an alternative activity is known as the opportunity cost of that activity. Simply put, it means that if you choose one activity, you forfeit the chance to do another.
Therefore,
The opportunity cost of the third bicycle is 20 tents.
To learn more about opportunity cost from the given link:
brainly.com/question/3611557
