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Absolute Corporation currently has $50 million in lia-bilities and common equity in combination. The firm has no preferred stock. After careful evaluation, the CFO constructed
Absolute Corporation currently has $50 million in lia-bilities and common equity in combination. The firm has no preferred stock. After careful evaluation, the CFO constructed the following table to show the CEO the effect of changing the firms capital structure:
| Amount of Debt in the Capital Structure | Earnings per Share (EPS) | Market Price per Share (P0) |
| $10,000,000 | $5.00 | $125.50 |
| 20,000,000 | 5.50 | 130.75 |
| 30,000,000 | 5.70 | 130.00 |
According to this information, what is Absolutes optimal capital structure? Explain your answer *SHOW ALL WORK*
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