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An investment-banking firm has estimated the following after-tax cost of debt and cost of equity for Mann's Fine Dining Establishments Incorporated. What is Mann's Fine
An investment-banking firm has estimated the following after-tax cost of debt and cost of equity for Mann's Fine Dining Establishments Incorporated. What is Mann's Fine Dining Establishments Incorporated's optimal capital structure? Hint) Compute the weighted average cost of capital (WACC) for each level of capital structure. The capital structure with the lowest WACC is optimal. After-tax cost of debt Proposition of debt 0% 10% 20% 30% 40% 50% 5,5% 5,6% 5.8% 6.2% 6.8% 7.7% 8.9% Cost of equity 13.5% 13.6% 13.8% 14.1% 14.6% 15.4% 16.4% 17.7% 60% 70% A. 20% debt and 80% equity financing B. 60% debt and 40% equity financing C. 50% debt and 50% equity financing D. 70% debt and 30% equity financing
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