An efficient firm employs inputs in such proportions that the marginal product/price ratios for all inputs are

Question:

An efficient firm employs inputs in such proportions that the marginal product/price ratios for all inputs are equal. In terms of capital budgeting, this implies that the marginal should equal the marginal in the optimal capital structure. In practice, firms often issue debt at interest rates substantially below the yield that investors require on the firm’s equity shares. Does this mean that many firms are not operating with optimal capital structures? Explain.

Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...