Problem:
The capital structure of a firm is a crucial decision that executives must make. In fact, the question that is highly related to the capital budgeting decision was discussed last week. That is after we have decided that a particular project is worth more than it costs we must determine how to finance its acquisition, either by selling debt or equity.
Discuss the influence of taxes and bankruptcy costs on the optimal capital structure. If you were the current CFO of Rite-Aid Pharmacy, how would these considerations guide your decision making in the near future as you consider RA's capital structure?
Please explain in detail.