Question $2$

You are an outside analyst trying to determine a company's target optimal market weighted

capital structure. Which of the following would be your best conclusion if you know nothing

else about the firm's target capital structure?

You should consider the current capital structure to be optimal and use that as the target capital

structure

You should use the average several of the company's competitors' structures as the target capital

structure

Youthould examine trends in the firm's capital structure or statements by management regarding

the optimal structure as the target capital structure