Question
Feldspar Inc. is considering the capital structure for a new division. Management has been given the following cost information: Debt/assets. kd(BT Cost of Debt). ke(Cost
Feldspar Inc. is considering the capital structure for a new division. Management has been given the following cost information:
Debt/assets. kd(BT Cost of Debt). ke(Cost of Equity)
.30. 6%. 12%
.40. 6.25% 12.5%
.50 7% 13.2%
.60 8% 14.0%
.70 9.5% 16.5%
Based on this information, what capital structure (debt/asset ratio) should management accept? Assume the marginal tax rate is 30%
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Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes, Arshad Ahmad, Jordan Fortino
6th Canadian edition
1259453146, 978-1259453144
