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Optimal Fraction of Debt

Define the optimal fraction of debt and the growth rate of a firm. What is the relationship between the two?

Solution Preview

The optimal fraction of debt has an inverse relationship with a firm. As the firm grows larger, the optimal fraction of debt decreases. When the firm is smaller, the optimal fraction of debt remains large because the firm relies more ...

Solution Summary

This solution explains the optimal fraction of debt and growth rate of a firm. The relationship between both elements is also discussed.

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