Evaluating Tampa Manufacturing's Capital Structure Tampa Manufacturing, an established producer of printing equipme its sales to remain flat for the next 3 to 5 years due to both a weak e look and an expectation of little new printing technology develop period. On the basis of this scenario, the firm's management has been by its board to institute programs that will allow it to operate more efficientl earn higher profits, and, most important, maximize share value. In this regard the firm's chief financial officer (CFO), Jon Lawson, has been charged with eval. uating the firm's capital structure. Lawson believes that the current capital struc ture, which contains 10 percent debt and 90 percent equity, may lack adequate financial leverage. To evaluate the firm's capital structure, Lawson has gathered the data summarized in the following table on the current capital structure (10 percent debt ratio) and two alternative capital structures-A (30 percent debt ratio) and B (50 percent debt ratio)-that he would like to consider. Chapter 11 over that Capital structure Current (10% debt) Source of capital (30% debt) (50% Long-term debt $1,000,000 9% 100,000 shares 12% $3,000,000 10% 70,000 shares 13% $5,000,000 12% 40,000 shares 18% Coupon interest rate Common stock Required return on equity, k These structures are based on maintaining the firm's current level of $10,000,000 of total financing Interest rate applicable to all debt. Market-based return for the given level of risk