A firm$$s current balance sheet is as follows:

Assets $ $120$ Debt $ $36$

Equity $ $84$

What is the firm$$s weighted$-$average cost of capital at various combinations of debt and equity, given the following information? Round your answers to one decimal place.

Debt$/$Assets After$-$Tax Cost of Debt Cost of Equity Cost of Capital

$0\%8\%11\%$

$\%$

$10811$

$\%$

$20811$

$\%$

$30912$

$\%$

$401012$

$\%$

$501013$

$\%$

$601114$

$\%$

Construct a pro forma balance sheet that indicates the firm$$s optimal capital structure. Choose the best structure from the options analyzed in part a$.$ Compare this balance sheet with the firm$$s current balance sheet. Round your answers to the nearest dollar.

Assets $ $120$ Debt $

Equity $

What course of action should the firm take? Round your answer to the nearest whole number.

Since the firm is currently using

$\%$ debt financing, it

$-$Select$-$

at its optimal capital structure and

$-$Select$-$

As a firm initially substitutes debt for equity financing, what happens to the cost of capital?

The cost of capital initially

$-$Select$-$

If a firm uses too much debt financing, why does the cost of capital rise?

If a firm uses too much debt financing, the firm becomes

$-$Select$-$

financially leveraged and riskier. This causes the interest rate to

$-$Select$-$

and the cost of equity to

$-$Select$-$

$.$ These changes in the cost of debt and equity cause the cost of capital to

$-$Select$-$

$.$A firm's current balance sheet is as follows:

Assets

$$120$

Debt

$$36$

Equity

$$84$

nearest dollar.

What course of action should the firm take? Round your answer to the nearest whole number.

Since the firm is currently using

c$.$ As a firm initially substitutes debt for equity financing, what happens to the cost of capital?

The cost of capital initially

d$.$ If a firm uses too much debt financing, why does the cost of capital rise?

If a firm uses too much debt financing, the firm becomes financially leveraged and riskier. This causes the interest rate to

and the cost of equity to $\frac{?}{\text{b}\text{a}\text{r}}(-$ Select$-).$ These changes in the cost of debt and equity cause the cost of

capital ts