1. Jackson Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels:

Debt/Capital Projected Projected Stock

Ratio EPS Price

20% $3.10 $34.25

30 3.55 36.00

40 3.70 35.50

50 3.55 34.00

1. Assuming that the firm uses only debt and common equity, what is Jackson's optimal capital structure?
2. At what debt-to-capital ratio is the company's WACC minimized?

Please show calculations.