5%

0%

30%

60%

Dabney Electronics currently has no debt. It has 2 million stock shares outstanding, and 40% tax rate. The choices of debt/capital ratios (wd) are 0%,30%, and 60%."ws " is the equity/capital ratio. " rd " is the pre-tax interest rate. " rs " is the cost of equity. Based on the WACC calculations, can you identify the optimal debt/capital ratio