A. By definition, the optimal capital structure is the one that has the lowest (minimum) weighted-average cost of capital. This is the capital structure that most effectively and efficiently provides the capital that the company needs.
B. There is no relationship between the capital structure and earnings per share.
C. The capital structure that has the minimum risk may not be the most ideal capital structure as the cost of the capital may be higher than in other options. See the correct answer for a complete explanation.
D. The ideal capital structure is the one that will minimize the total cost of capital, not just the cost of debt.
