A firm's current balance sheet is as follows: a. Whot is the firm's meighted-average cost of capital at vasious combinations of debt and cquity, given the following information? found your answers to one decimal place. b. Construct a pro forma balance shent that indicates the firm's optimal capital structure. Choose the bert structure from the options analyzed in part a, Compere this balance s with the firm's current balance sheet, Round your answers to the nearest dollar. What course of action shiculd the firm take? Round your answer to the nearest whole number: Since the firm is currently using (3) we debt financing, it at its optimal capital structure and a. Find the optimal capital wructure (that is, optimel combination of debt and equity financing). Round your answers for the copital structure to the nearest whole number and for the cost of capital to one decimal blace. The ootimal caoital structure: W oebt and equity with a cost of cacital of b. Why does the cost of capital initisilly decine as the firm sutistitutes debt for equity financing? The cost of capital initaty decines because the firm cost of debe is than the cost of equity. 6. Why will the cost of funds eventually rise as the firm becomes more finandialy leveraged? As the firm becomes more financially leveraged and risbier, the cost of debt and equity will and cause the cost of capical to increase. d. Why is debt financing mere comvinon than finanoing with preferred steck? Debt finsncing is more common thes financing with preferred stock becaute of cost of the preferred stock. c. If interest were not a tax-deductible expense, what effert would that have on the firmis cost of capitan? If interest were not a tax deductible, the cost of debt would be the cost of capital