Feldspar Inc. is considering the capital structure for a new division. Management has been given the following cost information:

Debt/assets           kd(Cost of Debt)         ke(Cost of Equity)

.30                                 .10                                    .125

.40                                 .105                                    .13

.50                                 .11                                      .135

.60                                  .117                                  .142

.70                                  .13                                       .155

Based on this information, what capital structure (debt/asset ratio) should management accept? Assume the marginal tax rate is 40%

a. 60% has lowest cost of capital

b. 40% has lowest cost of capital

c. 50% has lowest cost of capital

d. 70% has lowest cost of capital