3 Part B Optimal Capital Structure 8 Panther Pork Products Inc. has consulted with investment bankers and determined the interest rate it would pay for 9 different capital structures, as shown below. Data for the risk-free rate, the market risk premium, an estimate of 10 Panther's unlevered beta, and the tax rate are also shown below. Based on this information, what is the firm's optimal 11 capital structure and what is the weighted average cost of capital at the optimal structure? 12 13 Input Data Risk-free rate Market risk premium Unlevered beta Tax rate 6.5% 0.9 35.0% 15 Percent 16 Financed with 17 Debtw.) 0% 10% 20% 30% 40% 50% 60% Before tax Cost Debt (rd) 6.0% 6.5% 7.5% 8.0% 9.0% 12.04 14.0% 16.0% 70% 27 Fill in formulas in the yellow cells to find the optimum capital structure. 29 30 Debt Value Ratio (wa) 0% 10% 20% Equity Value DebuEquityA T Cost of Ratio (w.) Ratio (w/w) Debt (v) 0.00 0.11 Levered Beta Cost of Equity WACC 40% 50% 60% 70% WACC at optimum debt ratio - Optimum debt ratio