Most Financial Theorists Believe That the Optimal Capital Structure Is

question 63

Multiple Choice

Most financial theorists believe that the optimal capital structure is a ________ with a debt to total value ratio somewhere around ________.

• A) point; 50%
• B) point; 25%
• C) range; 30%-60%
• D) range; 10%-40%

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Definitions:

Decreasing-cost Industry

An industry where the cost per unit of output decreases as the scale of production increases.

Long-run Equilibrium Price

The price level at which the quantity supplied equals the quantity demanded, achieved over a period where all inputs can be varied by producers.

Increase in Demand

A situation where there is a rise in consumers' desire to purchase goods or services, leading to higher quantity demanded at every price level.

Constant Costs

Occur when the cost of producing an additional unit of a good does not change as the scale of production increases or decreases.