Optimal Capital Structure and the Cost of Capital

As we discussed earlier, the capital structure that maximizes the value of the firm is also the one that minimizes the cost of capital. Figure 17.7 illustrates the static theory of capital structure in terms of the weighted average cost of capital and the costs of debt and

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

VI. Cost of Capital and Long-Term Financial Policy

17. Financial Leverage and Capital Structure Policy

© The McGraw-Hill Companies, 2002

PART SIX Cost of Capital and Long-Term Financial Policy

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