13.4 Richmond Clinic has obtained the following estimates for its costs of debt and equity at various capital structure.

Percent Debt After Tax Cost of Debt Cost of Equity

0% 16%

20 6.6% 17

40 7.8 19

60 10.2 22

80 14 27

What is the firms optimal capital structure? (Hint: Calculate its corporate cost of capital at each structure. Also, note that data on component costs at alternative capital structures are not reliable in real world situations.