Chapter $16$: Firm Capital Structure $($Optimal Capital Structure$)$

Q No$.1$

Percent financed with debt

DEBT RATE

$00\mathrm{.}1$

$0\mathrm{.}10\mathrm{.}1$

$0\mathrm{.}20\mathrm{.}105$

$0\mathrm{.}30\mathrm{.}11$

$0\mathrm{.}40\mathrm{.}12$

$0\mathrm{.}50\mathrm{.}14$

$0\mathrm{.}60\mathrm{.}16$

Operating profit of firm is Rs$.80,000$ and tax rate is $40\%.$ Risk free rate is $10\%,$ market premium is $6\%$ and unlevered beta is $1.$

Required:

Calculate at what level of debt firm will maximized value.