Question

Different divisions with differing lines of business use different costs of capital because their cost of equity is different and also because the​ ________ could be different. A. optimal asset mix B. optimal current ratio C. optimal debtminusequity ratio D. optimal volatility

Answer 1

C. optimal debt - equity ratio

Step-by-step explanation:

Cost of capital is based on source of capital, and weights of capital, therefore major components include cost of equity, cost of debt, and their weight-age thus the debt to equity ratio plays an important role,

correct option is optimal debt - equity ratio, this ratio depicts the proportion of debt to equity.