Question
Ellen Kauer has been registered for financial management course and sought help. During their conversations about the business risk and the optimal capital structure of
Ellen Kauer has been registered for financial management course and sought help. During their conversations about the business risk and the optimal capital structure of a firm, the helper made the following statement: The main factors that affect the business risk are the ability to adjust output prices and operating leverage and business risk is the uncertainty regarding the net income of a firm. For a levered firm 40/60 debt to equity ratio is the optimal capital structure, which always maximizes the value of a firm. Do you agree or disagree with the helpers statement? Briefly explain.
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