CAPITAL STRUCTURE DECISION Reacher Technology has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown in the following table. Data for the risk-free rate, the market risk premium, an estimate of Reacher's unlevered beta, and the tax rate are also shown. Based on this information, what is the firm's optimal capital structure, what is the weighted average cost of capital at the optimal structure, and value of its operation? Percent Before-Tax Financed with Cost Debt Debt (wa) Input Data 0% Risk-free rate 4.5% Market risk premium 5.5% Unlevered beta Tax rate 6.0% 6.1 10 20 7.0 0.8 30 40.0% 8.0 10.0 40 12.5 50 60 70 Estimated free cash flow for this period is $100 M., and expect to 15.5 18.0 % Debt r.(%) Beta rs(%) WACC(%) Value of Operation 0 6.0 0.8 10 6.1 20 7.0 30 8 8.0 40 10.0 50 12.5 60 15.5 70 18.0