According to the trade-off theory, a firm's optimal capital structure:

Question 11 options:

	exists when the debt-equity ratio is 0.50.
	is the debt-equity ratio that results in the lowest possible weighted average cost of capital.
	is found by locating the mix of debt and equity which causes the earnings per share to equal exactly $1.
	is the debt-equity ratio that exists at the point where the firm's weighted after-tax cost of debt is minimized.