1.Transworld Consortium Corp. is trying to identify its optimal capital structure. Transworld Consortium Corp. has gathered the following financial information to help with the analysis.

Debt Ratio (%)	Equity Ratio (%)	rd%rd%	rs%rs%	WACC (%)
30	70	6.02	9.40	9.71
40	60	6.75	9.750	9.55
50	50	7.15	10.60	10.02
60	40	7.55	11.30	10.78
70	30	8.24	12.80	11.45

Which capital structure shown in the preceding table is Transworld Consortium Corp.s optimal capital structure?

A) Debt ratio = 40%; equity ratio = 60%

B) Debt ratio = 70%; equity ratio = 30%

C) Debt ratio = 50%; equity ratio = 50%

D) Debt ratio = 30%; equity ratio = 70%

E) Debt ratio = 60%; equity ratio = 40%

Consider this case:

2. Globex Corp. currently has a capital structure consisting of 35% debt and 65% equity. However, Globex Corp.s CFO has suggested that the firm increase its debt ratio to 50%. The current risk-free rate is 2.5%, the market risk premium is 7%, and Globex Corp.s beta is 1.25. If the firms tax rate is 35%, what will be the beta of an all-equity firm if its operations were exactly the same?