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After Tax Cost of Debt 7% Cost of Equity 11% Problem 21-05 a. Given the following determine the firm's optimal capital structure: Debt/Assets 0% 10
After Tax Cost of Debt 7% Cost of Equity 11% Problem 21-05 a. Given the following determine the firm's optimal capital structure: Debt/Assets 0% 10 20 30 40 50 60 11 7 11 12 8 10 15 13 18 Round your answers for capital structure to the nearest whole number and for the cost of capital to one decimal place The optimal capital structures debt and equity with a cost of capital of b. In the firm were using 40 percent debt and 60 percent equity, what would that tell you about the firm's use of financial leverage? Round your answer for the cost of capital to one decimal place. If the firm uses 40% debt financing. It would be using Select financial leverage. At that combination the cost of capitalis The firm could lower the cost of capitol by substituting Schect c. What two reason plain why debt is cheaper than equity? Debt is cheaper than equity because interest expense Select In addition, equity investors bear setechnik d. If the firm were using 20 percent debt and 80 percent equity and earned a return of 9.1 percent on an investment, would this mean that stockholders would receive less than their required return of 11.0 percent? If the hears 9.1% on an investment, the stockholders will earn Select than their required 11.00 What return would Stockholders receive Round your answer to one decimal place
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