4. What are the ways in determining the firm's optimal structure. 5. How would these factors affect the target capital structure?

Sales stability, High operating leverage, Increase in the corporate tax rate, Increase in the personal tax rate, Increase in bankruptcy costs,lavish perks, Financial flexibility, Firm's growth rate

1. What is the major weakness of Modigliani-Miller Irrelevance Theory? 2. What are "signaling" effects in capital