Economics Homework Help

Morgan State University Capital Structure and Capital Components Discussion

 

I need help with a Finance question. All explanations and answers will be used to help me learn.

Define the idea of capital structure and capital components.  Why is capital structure important to the cost of capital concept?  In many capital structure discussions, preferred stock is lumped in with either debt or common equity.  With respect to the cost of capital, however, it’s treated separately.  Why?