applies next five problems.) Sail, Inc. is trying to determine its optimal capital structure. The chief financial officer has obtained estimates of the before tax cost of debt (ta) from the firm's investment banker. She has estimated the common stock beta for each level of debt and has partially completed the worksheet below. The firm's marginal tax rate is 40%, the market return (m) is 10%, and the risk-free rate of retum (PRF) is 6%. Bata Cost of Capital (b) 1.50 Capital Structure DIA 0 0.20 0.30 0.40 0.50 0.60 Cost of Debt (before tax) (ra) 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% Cost of Equity (re) 12.00% 12.92% 13.54% (WACC) 12.00% 11.30% 1.89 2.10 2.40 2.85 11.04% 15.60% 17.40% 11.28% What is the firm's cost of capital (WACC) for each of the debt levels, .30 and .50, respectively? D/A - 30D/A = .50 A) 11.50% 12.50% B) 11.28% 12.00% C) 11.10% 11.04% D) 11.04% 11.28% E) 11.10% 11.10% What is the firm's optimal capital structure? A) D/A = 20 B) D/A-30 C) D/A- ,40 D) D/A - 50 OEA- E) D/A-160