Question
GE Corp. is examining its capital structure with the intent of arriving at an optimal debt ratio. It currently has no debt and has a
GE Corp. is examining its capital structure with the intent of arriving at an optimal debt ratio. It currently has no debt and has a beta of 1.5. The riskless interest rate is 9%, and the risk premium is 8.3%. Your research indicates that the debt rating will as follows at different debt levels:
The firm currently has 1 million shares outstanding at $ 20 per share. (Tax rate = 40%)
What is the firm's optimal debt ratio?
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Entrepreneurial Finance Venture Capital Deal Structure And Valuation
Authors: Janet Kiholm Smith, Richard L. Smith
2nd Edition
1503603210, 978-1503603219
