Capital structure refers to the mix of own and borrowed funds. The factors affecting the choice of capital structure are:

(A) Business Cycle

(B) Cost of debt

(C) Return on Investment

(D) Cost of Equity

Choose the correct answer from the options given below:

Option 1 -> (A), (B) and (D) only - Includes business cycle which is not a primary determinant of capital structure, though costs of debt and equity are relevant.

Option 2 -> (A), (B) and (C) only - Includes business cycle which is not a core factor, but correctly includes cost of debt and ROI while excluding cost of equity which is essential.

Option 3 -> (A), (B), (C) and (D) - Includes all factors including business cycle, which is not considered a primary factor in determining capital structure mix.

Option 4 -> (B), (C) and (D) only - Correctly identifies the three fundamental factors: cost of debt, return on investment, and cost of equity, while excluding business cycle.

Hence, Option 4: (B), (C) and (D) only -> The primary factors affecting capital structure choice are: Cost of debt (determines borrowing expense), Return on Investment (helps evaluate leverage benefits), and Cost of Equity (determines equity financing expense). These three factors directly influence the optimal mix of debt and equity. Business cycle, while affecting business operations, is not a fundamental determinant of capital structure composition. -> correct