A firm's current balance sheet is as follows:

the nearest dollar.

Assets

$$110$

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, $it$

at its optimal capital structure and

should

not change the capital structure. $$

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

i$]$ financially leveraged and riskier. This causes the interest rate to $|$

and the cost of equity to $|$

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