The Ideal Capital Structure

question 168

Multiple Choice

The ideal capital structure:

• A) Is that combination of debt and equity which results in a debt-equity ratio of 1.0.
• B) Is that combination of debt and equity which yields the highest level of sales growth.
• C) Is that of an unlevered firm.
• D) Produces the lowest weighted average cost of capital.
• E) Is generally unobtainable as it exists only in a firm financed solely with debt.

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Definitions:

Nash Equilibrium

A concept in game theory where no player can benefit from changing strategies if the other players keep their strategies unchanged.

Low Price

Refers to the practice of setting the cost of goods or services at a minimal level, often to attract customers or compete in the market.

High Price

The characteristic of goods or services being offered at a cost considered above the average or expected market value.

Nash Equilibrium

A concept in game theory where no participant can gain by unilaterally changing their strategy if the strategies of others remain unchanged.