Question: The optimal structure has been achieved when the depth equity ratio is equal to one weight of equity is equal to the weight of depth

The optimal structure has been achieved when the depth equity ratio is equal to one weight of equity is equal to the weight of depth cost of equity is maximize given a pretax cost of debt debt equity ratio is such that the cost of debt exceeds the cost of equity present value of the financial distress cost equals the present value of the tax shield on debt

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