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Finance Tutors please answer the single question attached. 4. Ard Enterprises is studying various potential capital structures. The table below shows their cost of equity
Finance Tutors please answer the single question attached.
4. Ard Enterprises is studying various potential capital structures. The table below shows their cost of equity and pretax cost of debt for various debt ratios. Assuming their tax rate is 40%, determine the firm's optimal capital structure. What will the weighted average cost of capital (WACC) be at that point? Debt Ratio (% of capital structure that is debt) 0% 10% 20% 30% 40% 50% 60% Cost of Equity Pretax Cost of Debt 14.0% 14.2% 14.6% 15.4% 17.0% 20.0% 26.0% 7.0% 7.2% 7.6% 8.2% 9.0% 10.0%Step by Step Solution
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