Capital Structure decisions in perfect capital markets

Question:

In a perfect capital market, what advice would you give a corporate financial manager on making capital structure decisions? Justify your advice. How and why would your advice change as real world capital market imperfections are introduced? 

Essay format.

Word limit 750 words.

Summary:

The assignment in economics is about capital structure decisions to be taken in a perfect capital market. The solution focuses on the prevailing capital market and the type of capital structure that needs to be maintained by a corporate organization. The cost and availability of debt and equity play a major role in the debt equity ratio of a company. The concept has been explained in detail in the solution.

Total word count is 739

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