💼 Pre-MBA Exam Prep

Capital structure decisions involve choosing between:

A Revenue and expenses
B The mix of debt and equity financing that minimizes the cost of capital and maximizes firm value
C Fixed and variable assets
D Short and long-term investments

✓ Correct Answer: Option B

Optimal capital structure: balances tax benefits of debt (interest deductibility) vs bankruptcy costs and financial distress. Trade-off theory suggests optimal leverage exists.

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