Firm Value (V)
  ^
  |                     / \
  |                   /     \  * Optimal Capital Structure
  |                 /         \   (V_L is maximized here)
  |               /             \
  |             /                 \
  |           /                     \
  |         /                         \
  |       /                             \
  |     /                                 \
  |   /                                     \
  | /_________________________________________\____> Debt Ratio (D/V)
  V_U (Value of Unlevered Firm)
  
  *Upward slope driven by PV of Interest Tax Shield
  *Downward slope driven by PV of Financial Distress/Bankruptcy Costs