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Following three problems Current Total assets $ 3 , 0 0 0 , 0 0 0 , 0 0 0 Tax rate 2 5 %

Following three problems
Current Total assets $3,000,000,000 Tax rate 25%
Operating income (EBIT) $8,000,000,000 Debt ratio 0%
Interest expense $0 WACC 10%
Net income $480,000,000 M/B ratio 1.00\times
Share price $32.00 EPS $3.20
Estimated growth rate 0%
Dividend payout ratio 100%
After going through extensive analysis, the company has decided to target 30% debt and 70% equity based on market values. This strategy is expected to increase the cost of equity to 13%, assuming the pre-tax cost of debt 7%.
Do you agree with this target capital structure strategy as a more optimal capital structure?
Group of answer choices
Yes, the target strategy is more optimal.
No, the target strategy is more optimal.

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