A firm's optimal capital structure: a

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A firm's optimal capital structure:

a. is generally a mix of 40 percent debt and 60 percent equity.

b. is the debt-equity ratio that results in the lowest possible weighted average cost of capital.

c. is found by locating the mix of debt and equity which causes the earnings per share to equal exactly $1.

d. exists when the debt-equity ratio is .50.

e. is the debt-equity ratio that exists at the point where the firm's weighted aftertax cost of debt is minimised.