2. 3. 4. 5. 6. 7. 8. 9. Problem 22-10 The financial manager has determined the following schedules for the cost of funds: Cost of Equity 16% 16 16 16 eBook Assets Debt ratio 0% 10 20 Assets 30 40 50 60 a. Determine the firm's optimal capital structure. Round your answer to two decimal places. The optimal capital structure consists of -Select- % debt resulting in the cost of capital equal to %. Cost of Debt 5% b. Construct a simple pro forma balance sheet that shows the firm's optimal combination of debt and equity for its current level of assets. Round your answers to the nearest dollar. $700 55961 % -Select- $ 7 Balance Sheet Debt Equity TA c. An investment costs $500 and offers annual cash inflows of $153 for five years. Should the firm make the investment? Use Appendix D to answer the question. Round your answer to the nearest whole number. The investment -Select- be made since the internal rate of return that is the cost of capital. Debt 18 19 $ Equity $ d. If the firm makes this additional investment, how should its balance sheet appear? Round your answers to the nearest dollar. Balance Sheet 700 to $ e. If the firm is operating with its optimal capital structure and a $500 asset yields 20.0 percent, what return will the stockholders earn on their investment in the asset? Round your answer to two decimal places. %

The financial manager has determined the following schedules for the cost of funds: a. Determine the firm's optimal capital structure. Round your answer to two decimal places: The optimal capital structure consists of \%) debt resutting in the cost of capital equal to %. b. Construct a simple pro forma balance sheet that shows the firm's optimal combination of debt and equity for its current level of assets. Round your answers to the nearest dollar. c. An investment costs $500 and offers annual cash inflows of $153 for five years. Should the firm make the investment? Use Appendix D to answer the question. Round your answer to the nearest whole number. The investment be made since the internal rate of return that is 96 the cost of capital. d. If the firm makes this additional investment, how should its balance sheet appear? Round your answers to the nearest dollar. e. If the firm is operating with its optimal capital structure and a $500 asset yields 20.0 percent, what return will the stockholders earn on their investment in the assetz Round vour answer to two decimal places. \%