DefinitionIntroductory
What is the optimal capital structure according to the chapter on Capital Structure and Leverage?
The optimal capital structure is the mix of debt, preferred stock, and common equity that maximizes a stock's intrinsic value and minimizes the weighted average cost of capital (WACC).
Key points
- Optimal capital structure maximizes intrinsic value.
- It minimizes the weighted average cost of capital (WACC).
- Includes a mix of debt, preferred stock, and common equity.
Source:Fundamentals of Financial Management, Concise Edition· Capital Structure and Leverage· p. 477–480
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Fundamentals of Financial Management, Concise Edition
Fundamentals of Financial Management, Concise Edition
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9e · Cengage Learning