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define optimal capital structure? illustrate with examples:
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Answer / sachin
The Optimal Capital structure is that Capital Structure at
which the weighted Average cost of capital (Ko) is Minimum.
It is that combination of Equity and Debt at which the
total cost of capital is minimum.
| Is This Answer Correct ? | 19 Yes | 1 No |
Answer / nagabrahmachari
the optimum capital structure is a point where the cost of
the capital is minimum and the rate of ROI is Maximum.
| Is This Answer Correct ? | 4 Yes | 1 No |
Answer / surya
optimum capital structure is the one of the company status
indication to there investor that means which capital
structure give the high profit and higher EPS(earning per
share)is called as the optimum capital structure.
| Is This Answer Correct ? | 3 Yes | 1 No |
Answer / abhishek
The best debt-to-equity ratio for a firm that maximizes its value. The optimal capital structure for a company is one which offers a balance between the ideal debt-to-equity range and minimizes the firm's cost of capital. In theory, debt financing generally offers the lowest cost of capital due to its tax deductibility. However, it is rarely the optimal structure since a company's risk generally increases as debt increases.
Read more: http://www.investopedia.com/terms/o/optimal-capital-structure.asp#ixzz1wjYPdYhW
| Is This Answer Correct ? | 1 Yes | 0 No |
Answer / badri.jena
The optimal capital structure usually involves some debt,
but not 100% debt. Ordinarily, some firms cannot identify
this optimal point precisely, but they should attempt to
find an optimal range for the capital structure.
The required rate of return on equity capital (R) can be
estimated in various ways, for example, by adding a
percentage to the firm's long-term cost of debt. Another
method is the Capital Asset Pricing Model (CAPM).
| Is This Answer Correct ? | 8 Yes | 8 No |
Answer / mahadevan
there is nothing known as an optimal capital structure for a
company. it is in hands of the corporates to manage capital
structure strategically so as to be benefecial. also
speaking about the debt equity ratio it varioes from various
sides as in from a lenders perspective.
| Is This Answer Correct ? | 5 Yes | 7 No |
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