Answer (D) is correct . Ideally, a firm will have a capital structure that minimizes its weighted-average cost of capital. This requires a balancing of both debt and equity capital and their associated risk levels.
Answer (A) is incorrect because EPS is based on the relationship between costs and revenues, whereas the capital structure is related only to the cost of capital.
Answer (B) is incorrect because The cost of equity capital must also be considered when optimizing capital structure.
Answer (C) is incorrect because The minimum risk may be associated with high costs.
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