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A company has an optimal capital structure of 55% equity and 45% debt. This year they expect to have retained earnings of $6m. They can
A company has an optimal capital structure of 55% equity and 45% debt. This year they expect to have retained earnings of $6m. They can raise up to $3m in long term debt at 5%. All additional debt will cost 7% pretax. The companys marginal tax rate is 21%. 1. what is their breakpoint on equity
2. what is their first break point on debt
3. which will change first debt or equity?
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