A. The lowest risk may not be the best capital structure for the company because the lowest tax rate would be achieved with all equity financing. All equity financing may not provide the lowest cost of capital and it may lead to investors not wanting to be owners when the ownership share is so diluted from all of the shares that have been issued.

B. The maximization of financial leverage would lead to high levels of risk and would therefore probably not be the best capital structure.

C. The capital structure that maximizes the share price is the optimal capital structure. If the share price is at its highest, that means that management has properly balanced the risk and returns in its capital structure and investors value this structure the most.

D. The lowest tax liability may not be the best capital structure for the company because the lowest tax rate would be achieved with all debt financing. All debt financing may not provide the lowest cost of capital and it may lead to high levels of risk for the company because of all of the fixed interest payments.