In Each of the Theories of Capital Structure the Cost

question 59

Essay

In each of the theories of capital structure the cost of equity rises as the amount of debt increases. So why don't financial managers use as little debt as possible to keep the cost of equity down?
After all,isn't the goal of the firm to maximize share value and minimize shareholder costs?

---

Definitions:

Wrongful Civil Proceedings

Filing a false civil lawsuit.

Malicious Prosecution

Bringing false criminal charges against an innocent victim.

Abuse Of Process

The use of a legal procedure for a purpose other than that for which it is legitimately intended.

Survival Statutes

Laws that allow certain causes of action to continue to be effective or enforceable even after the death of a person involved in the action or the entity to which the statute pertains.