Which of the following statements is most correct concerning a corporation\'s op

Question

Which of the following statements is most correct concerning a corporation's optimal capital structure?

A) The optimal capital structure maximizes the present value of the interest tax shield.

B) The optimal capital structure occurs at the point where the market value of the levered firm is maximized.

C) The optimal capital structure minimizes the present value of financial distress costs and agency costs.

D) The optimal capital structure occurs where the present value of the interest tax shield equals the present value of the firm's bankruptcy costs.

Explanation / Answer

B) is correct , The foremost objective of a corporate is to maximize shareholders' value thus even the capital structure should be one that maximizes it.

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