Which of the following is accepted wisdom regarding the optimal capital structure?

A) For most firms, the optimal capital structure is somewhere between 30% and 50% debt.
B) A firm with good profit prospects and little to no debt is probably missing an opportunity by not using borrowed money if interest rates are reasonable.
C) Debt levels above 60% create excessive risk and should be avoided.
D) All of the above

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Shyla Smith · Accepted Answer

Final Answer : D, Explanation :  All of the above options are accepted wisdom regarding the optimal capital structure. Option A suggests that the optimal capital structure for most firms falls between 30% and 50% debt. Option B suggests that a firm with good profit prospects and little to no debt is probably missing an opportunity by not using borrowed money if interest rates are reasonable. Finally, option C suggests that debt levels above 60% create excessive risk and should be avoided.

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