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corporate finance, capital structure plays a pivotal role in shaping a company's financial health and strategic decision-making. The capital structure represents the mix of
corporate finance, capital structure plays a pivotal role in shaping a company's financial health and strategic decision-making. The capital structure represents the mix of debt and equity a company utilizes to finance its operations and investments. This intricate balance can have profound implications for a company's cost of capital, risk profile, and overall financial stability. Question: How does a company's capital structure impact its weighted average cost of capital (WACC), and what considerations should businesses weigh in determining the optimal mix of debt and equity to achieve an efficient capital structure? Please provide a comprehensive answer, exploring the relationship between capital structure and WACC, and elucidate key factors that influence the decision-making process for establishing an effective and sustainable capital structure.
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