4. Determining the optimal capital structure Review the following situation: 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 (%) 30 Equity Ratio (%) 70 EPS (5) 1.25 DPS ($) 0.55 Stock Price ($) 36.25 40 60 1.40 0.60 37.75 50 50 1.60 0.65 39.50 60 40 1.85 0.75 38.75 70 30 1.75 0.70 38.25 Which capital structure shown in the preceding table is Transworld Consortium Corp.'s optimal capital structure? O Debt ratio -70%; equity ratio -30% O Debt ratio -30%; equity ratio -70% O Debt ratio = 40%; equity ratio = 60% O Debt ratio = 60%; equity ratio = 40% O Debt ratio -50%; equity ratio = 50% Axis Chemical Co. has found that its expected EPS is maximized at a debt ratio of 45%. Does this mean that Audls Chemical Co.'s optimal capital structure calls for 45% debt? Debt Ratio (%) Equity Ratio (%) 70 EPS ($) 1.25 30 DPS ($) 0.55 Stock Price ($) 36.25 40 60 1.40 0.60 37.75 50 50 1.60 0.65 39.50 60 40 1.85 38.75 70 0.75 0.70 30 1.75 38.25 Which capital structure shown in the preceding table is Transworld Consortium Corp.'s optimal capital structure? O Debt ratio = 70%; equity ratio = 30% O Debt ratio = 30%; equity ratio -70% Debt ratio -40%; equity ratio = 60% O Debt ratio = 60%; equity ratio -40% O Debt ratio = 50%; equity ratio = 50% Axis Chemical Co. has found that its expected EPS is maximized at a debt ratio of 45%. Does this mean that Axis Chemical Co.'s optimal capital structure calls for 45% debt? O Yes O No Grade It Now Save & Continue