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define optimal capital structure? illustrate with examples:
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Answer Posted / 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).
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