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Given the following schedules: debt/assets cost of cost of debt* equity 0% 7% 14% 10 7 14 20 7 14 30 8 14 40 8

Given the following schedules:

debt/assets cost of cost of debt* equity 0% 7% 14% 10 7 14 20 7 14 30 8 14 40 8 16 50 10 18 * after tax cost of debt a.What is firm's weighted average cost of capital at each of the various combinations of debt and equity? b. What is the firm's optimal capital structure and explain why?

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