Asked by
Derrick Warren
on Dec 01, 2024
Verified
In the MM model, the mix of debt and equity that minimizes the cost of capital is the:
A) optimal corporate structure.
B) target financial structure.
C) optimal capital structure.
D) optimal degree of combined leverage.
MM Model
MM Model refers to the Modigliani-Miller theorem, which propositions about the irrelevance of capital structure in determining the overall value of a firm under certain market conditions and assumptions.
Optimal Capital Structure
Optimal capital structure is the ideal mix of debt and equity financing that minimizes a company's cost of capital and maximizes its stock price.
Cost Of Capital
Represents the rate of return that a company must earn on its investment projects to maintain its market value and attract funds.
- Acquire knowledge about the fundamentals of perfect capital arrangement and the negotiations involved in obtaining funds through equity and debt.
Verified Answer
DH
Learning Objectives
- Acquire knowledge about the fundamentals of perfect capital arrangement and the negotiations involved in obtaining funds through equity and debt.