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Optimal Capital Structure in a Domestic Market Is Determined by Many

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Essay

Optimal capital structure in a domestic market is determined by many factors. Is there a single best debt ratio for a firm. If so, what is it? Does there appear to be a range for optimal capital structure for U.S. firms? If so, what is it? What factors were identified by the authors as important for an individual firm's optimal capital structure?


Definitions:

Net Present Value

A calculation that compares the present value of all cash inflows and outflows of a project or investment using a specific discount rate.

One-Shot Approach

A method or strategy executed with a single attempt, without the prospect of repetition.

Monthly Interest Rate

The interest rate applied to a loan or debt for a one-month period, often used to calculate the monthly interest payments.

Variable Cost

A type of cost that varies with production volume, increasing as production increases and decreasing as production decreases.

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