When agency and bankruptcy costs are considered, the optimal capital s
When agency and bankruptcy costs are considered, the optimal capital structure has a debt level where
A) bankruptcy costs are maximized.
B) the debt/equity ratio is 2:1.
C) the cost of equity equals zero.
D) the cost of debt equals the cost of equity.
E) the sum of agency and bankruptcy costs equal the benefits of using debt.
ANSWER
E
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