A company$$s capital structure decisions address the ways a firm$$s assets are financed $($using debt, preferred stock, and common equity capital$)$ and is often presented as a percentage of the type of financing used.

As with all financial decisions, the firm should try to set a capital structure that maximizes the stock price, or shareholder value. This is called the optimal capital structure.

Which of the following statements regarding a firm$$s optimal capital structure is true?

a$.$ The optimal capital structure minimizes the cost of equity.

b$.$ The optimal capital structure minimizes the firm$$s price$-$to$-$earnings ratio.

c$.$ The optimal capital structure maximizes the firm$$s cost of debt.

d$.$ The optimal capital structure maximizes return on equity.