Analyses on the Models of Capital Cost and Capital Structure

The paper expounds the theory of capital structure and the target for enterprises' decision and sets up two LP models based on purpose functions which aims at raising capital and on restraint functions. One LP model of capital structure means the maximum of returns of common shares and the other LP model refers to the minimum of capital cost. When enterprises makes out their decision, they must put cost, risk and returns into consideration, reduce capital cost and accounting risk under the conditions of satisfying the need for capital and try to gain the best returns for shareholders.