The optimal capital structure of a firm is the right combination of equity and debt financing. It allows the firm to have a minimum cost of capital while having the maximum market value.

Compound interest is the interest on the initial principal as well as the interest from the prior periods. It is also referred to as interest on interest.

The present value is the current value of future cash flows at a specific rate of return. The present value indicates that an amount of money today has a higher value than that same amount in the future.

Inflation is when the prices of goods and services increase over time. While the prices of goods and services increase, the purchasing power or value of money decreases.

Future value is the value of a current asset at a specific time in the future calculated based on an assumed growth rate.

CAPM is a measure used by investors to evaluate the expected return on investments. It allows investors to diversify their investments to achieve the desired return based on the risk of each investment.

Equity-risk premium is the difference between expected returns from the stock market and the expected returns from risk-free investments.

Modern Portfolio Theory is a theory presented in 1952 by Harry Markowitz on how risk-averse investors can create portfolios to maximize the return on investments based on the optimal levels of risk.