Describe the correct capital structure of a firm for obtaining the weights to work out the weighted average.

3 years ago
Financial Management

The correct capital structure for obtaining the weights to work out the weighted average, theoretically it is the optimal capital structure of the company. An optimal structure should take into account the following factors:

1. Accounting for the effect of risk

2. Leverage

3. Management control

However, in practice one can never achieve the optimal capital structure, as it can be seldom determined precisely. As a result, what is really sought is a capital structure that can permit the computation of the cost of capital that is not too far from the optimum rate/value.

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Sanisha Maharjan
Sanisha Maharjan
Jan 18, 2022
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