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The mix of debt and equity financing used by an organization is called its capital structure. Many managers struggle with finding a balance between these two options. It is a critical decision, as it impacts the organization’s assets, liabilities, and bottom line.
There is a cost associated with raising money to finance capital projects (cost of capital). The main objective is to minimize the cost of capital. What approach would you use to determine the optimal capital structure? Defend your position.
Be sure to respond to at least one of your classmates’ posts, comparing and contrasting the different approaches to the memorandum.