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help is appreciated Problem 22-10 The financial manager has determined the following schedules for the cost of funds: Cost of Debt 4% Cost of Equity
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Problem 22-10 The financial manager has determined the following schedules for the cost of funds: Cost of Debt 4% Cost of Equity 12% 12 12 4 4 Debt ratio 0 % 5 10 15 20 25 30 4 12 4 13 6 14 8 15 a. Determine the firm's optimal capital structure. Round your answer to two decimal places The optimal capital structure consists of -Select- % debt resulting in the cost of capital equal to % b. Construct a simple pro forma balance sheet that shows the firm's optimal combination of debt and equity for its current level of assets. Round your answers to the nearest dollar. Balance Sheet Assets $500 Debt $ Equity $ 500 c. An investment costs $500 and offers annual cash inflows of $119 for five years. Should the firm make the investment? Use Appendix D to answer the question. Round your answer to the nearest whole number The investment -Select- be made since the internal rate of return that is % -Select- the cost of capital d. If the firm makes this additional investment, how should its balance sheet appear? Round your answers to the nearest dollar. d. If the firm makes this additional Investment, how should its balance sheet appear? Round your answers to the nearest dollar Balance Sheet Assets $ Debt $ Equity $ e. If the firm is operating with its optimal capital structure and a $500 asset yields 10.0 percent, what return will the stockholders eam on their investment in the asset Round your answer to two decimal places. 5 Step by Step Solution
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