What is the Optimal capital Structure? Ina“ perfect world” environment with no taxes, no transaction costs and perfectly efficient financial markets, capital structure does not matter This is known as the Independence hypothesis: firm value is independent of capital structureWhat is the Optimal Capital Structure? • In a “perfect world” environment with no taxes, no transaction costs and perfectly efficient financial markets, capital structure does not matter. • This is known as the Independence hypothesis: firm value is independent of capital structure