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. The well-known graph that represents the optimal (or best) capital structure we would expect...

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Finance

. The well-known graph that represents the optimal (or best) capital structure we would expect to see for Englewood Industries, or any typical firm, has which of the shapes described below?

A. A downward-sloping straight line, indicating that the cost of capital declines steadily as the proportion of financing provided by lenders continues to increase.

B. A frown or inverted u-shape, indicating that the cost of capital rises as we move from zero debt to some debt financing but then declines as a high debt proportion is reached.

C. An upward-sloping straight line, indicating that the cost of capital rises steadily as the proportion of financing provided by lenders continues to increase.

D. A smile or u-shape, indicating that the cost of capital declines as we move from zero debt to some debt financing but then rises as a high debt proportion is reached. E. A horizontal straight line, indicating that the cost of capital remains essentially the same regardless of the proportion of debt financing the companys managers employ.

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